It’s Not Just TikTok. Chinese Firms Face More US Roadblocks

Mark Zuckerberg put his lungs on the line in March 2016. On a trip to Beijing seemingly aimed at helping persuade the government to let Facebook operate inside China, the CEO made time for a jog-cum-photo opp in a polluted Tiananmen Square.

Back home in Silicon Valley, meanwhile, China’s leading social media company, Tencent, was enjoying an easier overseas adventure. The owner of the popular messaging app WeChat acquired a controlling stake in Los Angeles-based Riot Games, producer of smash hit League of Legends, in 2011, and assumed full ownership in December 2015.

The contrast has widened in the years since Zuckerberg’s smog jog. The stunt ultimately did little to help Facebook vault China’s Great Firewall and gain access to almost a billion new users. Meanwhile, Tencent sank $90 million into the San Francisco mobile-gaming startup Pocket Gems, invested alongside Amazon in the hot autonomous car startup Zoox, and bought chunks of Uber, Snap, Tesla, and Reddit.

Now, though, Tencent and other Chinese companies face US hostility not unlike what Facebook dealt with in China.

On Monday, President Trump repeated his threat to ban TikTok, a hugely popular US video-sharing app owned by China’s Bytedance. Officials warn that TikTok could enable espionage or manipulate public opinion at Beijing’s behest. Microsoft said on Sunday that it is discussing a possible acquisition to save TikTok in the US; Trump gave his approval for such a deal Monday.

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But TikTok is unlikely to be the end of the administration’s efforts. US secretary of state Mike Pompeo said as much in an interview with Fox News on Sunday. “These Chinese software companies doing business in the United States, whether it’s TikTok or WeChat, are feeding data directly to the Chinese Communist party, their national security apparatus,” Pompeo said. “Those are the issues that President Trump’s made clear we’re going to take care of.”

Tencent’s WeChat, a social networking platform that supports mini-apps for payments, ecommerce and more, is ubiquitous in China but has just a few million users in the US, mostly Chinese expats or Westerners with contacts in Asia. It’s unclear if Tencent’s games, such as League of Legends and Honor of Kings, which boast hundreds of million monthly users worldwide and bring in billions of dollars in revenue each year, could also be targets.

Tencent’s US representatives have been quietly making the case that WeChat is not a threat. They have previously sought to address privacy and security concerns by claiming that US users’ data is stored and kept within the US. And they say that Chinese censorship does not apply to those using the app within the US. (TikTok makes the same arguments.) This year, the company engaged Washington, DC, lobbyists for the first time, through Riot Games, according to Congressional records. Tencent declined to comment.

“The question is, if a Chinese entertainment app like TikTok is being perceived as a national security threat by the United States, then what app developed by the Chinese is not?” says Yun Sun, codirector of the Stimson Center, a Washington, DC, nonprofit that aims to foster international peace and stability. “We do see the Chinese companies becoming increasingly concerned about the environment that they are, or will be, operating in in the US market.”

Yun believes it is still possible for Chinese tech companies to navigate US government concerns, perhaps by accepting compliance officers or foreign board members to provide oversight. “It’s not that if a company is Chinese there is absolutely no way to remedy the security threat,” she says. It is far from clear whether such extreme measures would be acceptable to the Chinese government, or if they would assuage US concerns.

Chinese companies in other industries already face restrictions and mounting pressure. Telecom giant Huawei has been banned from US networks and is a target of investigations and sanctions due to alleged intellectual property theft, perceived ties to the Chinese government, and alleged sales to Iran.

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