Assignment task:
TikTok and the Big Tech Crackdown
As we learned in this chapter, political, economic, and legal systems vary around the world. In November 2020, China's government blocked Ant Financial, a financial technology (or fintech) institution, from its initial public offering of company stock mere days before it was scheduled. Ant Financial was trying to raise capital to fund its expansion. But regulators canceled the stock offering after Jack Ma, its founder who also founded ecommerce giant Alibaba, criticized the government in a public speech. China's leaders saw the rise of the powerful technology elite as a threat to their rule and social stability.
In late 2021, the Chinese government announced that Ant Financial would be restructured as a financial holding company and would be overseen by China's central bank. This meant Ant Financial would be subject to regulations similar to those governing other Chinese banks. The move drastically lowered the expected profitability and market valuation of Ant Financial. The announcement of the restructuring came two days after China's government fined Alibaba $2.8 billion, which it called an "antitrust penalty."
Following Alibaba's penalty, billionaire founders of technology companies began very visibly donating enormous sums to Chinese charities and causes dear to the Chinese Communist Party. Within eight months of when the government crackdown began, founders of big Chinese technology companies including ByteDance, Tencent, Xiaomi, Meituan, and Pinduoduo had pledged to donate $13 billion from their personal fortunes or from those of their companies.
Chinese firm ByteDance owns the social media app TikTok and its twin product inside China called Douyin. Most experts believe ByteDance was to have its own initial public offering of stock in 2021. A valuation at the time of $140 billion made the company the most valuable technology startup in the world. But Beijing's big-tech crackdown ended those expectations for ByteDance as well.
China's crackdown on big technology is an attempt to gain greater control over its internet economy. The government intends to realign the relationship between private enterprise and the government. What that means is officials want companies to expand their service to the economic, social, and national-security goals of the Chinese Communist Party. The implication for business is uncertainty and risk that may scare away foreign investors. Series of events such as these should not shock businesspeople because companies and governments operate differently around the world.
Differences in political, economic, and legal systems can also cause conflict when governments try to protect themselves or their citizens from violations. The TikTok app of ByteDance was a huge hit among India's millions of young users before the government banned it in June of 2020. India and China have a long history of mistrust, and tensions between them sometimes erupt into border skirmishes. Also playing a role in the ban were citizen complaints that the app showed inappropriate content and there was a potential for misuse of user information by ByteDance or the Chinese government.
Pakistan banned and unbanned TikTok repeatedly. Conservatives would find content offensive while the government wanted foreign investment from global firms such as ByteDance. Each time the courts banned the app the company would promise to moderate offensive content on its platform and the ban would be lifted. The cycle would repeat itself when the courts received a new citizens' petition to again ban the app.
US regulators feared that ByteDance could misuse the personal information of millions of US TikTok users. US regulators were also concerned about censorship. In 2020, the US government even tried to force the sale of TikTok to US entities. With poor relations between the Chinese and US governments at the time, high-profile TikTok had simply become a victim of its own popularity.
TikTok took steps to reassure US regulators it protected user data. It launched a "Transparency Center" in Los Angeles and named US technology firm, Oracle, its "secure cloud provider." But experts retained reservations about potential violations when TikTok developed a way for users to apply for jobs by recording "TikTok résumés" in late 2021. TikTok's database contains people's faces, voices, and internet protocol addresses. Many people remain concerned about the breadth and depth of personal data TikTok has on its users and how its algorithms could potentially try to shape what people think about their own country and others.25
Thinking Globally:
- Do you believe China's political, economic, and legal systems will one day operate more similarly to those of the United States? Why or why not?
- Do you believe China is following the right course of action by reducing the political and market power of its biggest technology firms? Explain.
- While China's government took antimonopoly steps against its big technology companies, the US government was considering something similar against big US technology firms. Do you see any differences in the motives between the two countries for their antimonopoly efforts?
- Do you believe TikTok was treated unfairly by certain governments of the world? Are Facebook, Twitter, and other social media firms not in possession of sensitive user data as well? Explain.
Q1. Do you believe China's political, economic, and legal systems will one day operate more similarly to those of the United States? Why or why not?
Q2. Do you think China is following the right course of action by reducing the political and market power of its biggest technology firms? Explain your opinion.
Q3. While China's government took antimonopoly steps against its big technology companies, the U.S. government was considering doing something similar against big U.S. technology firms. Do you see any differences in the motives between the two countries for their antimonopoly efforts?
Q4. Do you think it is right for corporations to donate funds to political parties? Analyse this from an ethical perspective.