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The new House special committee tasked with warning Americans about the dangers of a rising China is focusing on TikTok, the Chinese-owned social media app that has amassed a huge American following despite suspicions that it could be used as a tool for foreign espionage or influence.
The implications of these new controls — part of Congress’s widening review of U.S. engagement with China — are unclear. Washington remains split on whether to ban the wildly popular app, order its sale or allow TikTok to continue scrolling through 100 million American smartphones. House Speaker Kevin McCarthy (R-Calif.) — who launched the committee as one of his first moves — this week named its 13 Republican members. Democrats have yet to capitalize on theirs.
Rep. Mike Gallagher (R-Wis.), the group’s chairman, wants to ban the app or force its sale to an American buyer, citing data security issues and Beijing’s potential use of TikTok as a propaganda weapon. In an interview, he said the overlapping issues of technology, privacy and foreign policy raised by the app’s meteoric growth in the U.S. illustrate why a wide-ranging commission is needed. TikTok CEO Shou Zi Chew agreed to appear on Capitol Hill for the first time in a March hearing before the House Energy and Commerce Committee.
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Gallagher’s objections to TikTok, which features short videos created by users, are shared by prominent Democrats. The Biden administration has been reviewing TikTok’s proposal for months to restructure its operations to eliminate the risk of Chinese government control or influence. Some analysts believe that action by Congress — or the approach of the 2024 election — could force the administration’s hand.
But the TikTok controversy is about more than the fate of the latest internet sensation.
The debate also highlights a key challenge facing the administration: how to define the parameters of an economic relationship with a nation it views as the United States’ main strategic rival — one that many in Congress describe as an outright enemy.
“Is there such a thing as a private company in China? I’m not sure there is,” Gallagher said. “This is what makes the ‘new Cold War’ so much more complex than the old Cold War. We should never have seceded from the Soviet Union.
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As American policymakers’ views of China have hardened into reflexive mistrust, Chinese companies that governors and mayors once courted for job-creating investments are now seen as Trojan horses for the Chinese Communist Party. Republican lawmakers, including some likely 2024 presidential candidates, want to ban Chinese purchases of American farmland.
Democrats have also taken a more even-handed view of the security risks of dealing with the world’s second-largest economy. The Biden administration is preparing new restrictions on US investment in Chinese companies, months after the president banned China from buying cutting-edge US computer chips or the equipment that makes them, a decision William Overholt of Harvard University called “a declaration of economic war .”
Gallagher’s plans show that a reimagining of the US-China economic relationship is gaining momentum. The stakes of even a partial separation of the two economies could hardly be higher. Despite growing geopolitical rivalry, two-way trade between the US and China in 2022 is likely to set a record, while companies such as Apple, General Motors and Caterpillar sell billions of dollars worth of goods to Chinese customers each year – and are thus vulnerable to retaliation from side of Beijing for any US action against TikTok.
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In a sign of the bipartisan appeal of a tough stance on China, the new House Committee on “Strategic Competition between the United States and the Chinese Communist Party” was created by a lopsided 365-65 vote.
The former Marine, the panel’s chairman, is a Princeton graduate with a doctorate in international relations from Georgetown. Only 38, he is a rising star in the Republican ranks and a vocal China hawk. In addition to TikTok, Gallagher plans to scrutinize military, economic and human rights issues related to China, and is determined to reduce what he calls a dangerous reliance on Chinese suppliers, including for fuels used in U.S. military munitions.
“Think about the absurdity there. The weapons we need for a future conflict with China are coming from China!” he said.
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Still, after 40 years of ever-increasing trade between the two nations, determining which deals are appropriate in this new environment and which harm U.S. national security will not always be easy.
Biden has already taken steps to make the supply chains of semiconductors, electric batteries, industrial materials and pharmaceuticals more sustainable by reducing the U.S.’s reliance on foreign suppliers, including China. The administration says it is pursuing a “small garden, tall fence” strategy that would restrict a limited number of advanced technologies while allowing most of the roughly $650 billion in annual goods trade to continue.
The president rejects the idea that the US is entering a “new Cold War” with China. But Gallagher et al Republicans have been less restrained, portraying China as an adversary seeking to overturn the US-led international order rather than a viable business partner.
In the middle are multinational corporations. As the political winds have turned against involvement in China, deals that would once have been celebrated are now shunned.
Virginia Gov. Glenn Youngkin this month rejected a potential bid by Ford to locate a new electric vehicle battery plant in the state, saying the automaker was acting as a “front for China” in seeking federal subsidies under the Inflation Reduction Act.
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Ford was exploring the state for a joint venture with Contemporary Amperex Technology, a Chinese lithium-ion battery maker. The $3.5 billion plant would reportedly mean 2,500 jobs for an underdeveloped corner of the state.
A 2020 survey of European trade with China gives a rough indication of the trade impact of a greater focus on national security. More than half of European goods exported to China did not raise security concerns, while 83 percent of Chinese products sent to European customers were also routine, consultancy Rhodium Group concluded. But roughly half of Chinese investments in Europe and a third of European financial holdings in China were flagged as problematic, including those involving advanced computers, sensitive data and critical infrastructure.
Analysis of European trade flows provides a “good basis” for analyzing how U.S. trade with China may evolve as security concerns cloud the relationship, said Daniel Rosen, a partner at Rhodium in New York.
“We need to start from scratch by looking at the fundamentals of our relationship with China,” Rosen said. “We have one of the deepest two-way trade relationships in history as a starting point. Eliminating it entirely would be a cure almost as bad as the disease.
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The debate over how far to go in thinning economic ties is taking place against a backdrop of public hostility toward China. In a Pew Research Center survey last year, 82 percent of Americans surveyed said they had an unfavorable view of the country, more than double the figure in 2012, when President Xi Jinping took office.
Even before Xi became president, China began to emphasize the development of domestic technology. The effort to reduce its dependence on the United States has accelerated in the past year along with the country’s growing economic role.
In an earlier era, TikTok might have been an emblem of American and Chinese cooperation. The service was developed by a subsidiary of ByteDance, a Beijing-based startup that has attracted funding from US investment firms such as Tiger Global Management, Kohlberg Kravis Roberts & Co., Carlyle Group, Goldman Sachs and Morgan Stanley.
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A few months after ByteDance was incorporated in 2012, for example, Susquehanna International Group Ltd. in Philadelphia bought 15 percent of the company in a $5 million funding round. Susquehanna’s share is now valued at $15 billion, according to a recent report by the Internet Governance Project (IGP) at the Georgia Institute of Technology.
The investment firm did not respond to a request for comment.
Now, instead of being celebrated, the popular social media site is presenting a cautionary tale about the costs associated with the breakdown of the US-China partnership.
Tik Tok says it has already spent $1.5 billion on its proposal to address Washington’s security concerns by removing its US operations from ByteDance’s control. The Interagency Committee on Foreign Investment in the United States (CFIUS) has been reviewing a proposed “mitigation agreement” since August that would put the US version of Tik Tok under a three-person board of directors made up of American executives subject to US government approval.
A spokeswoman for the Treasury Department, which chairs CFIUS, declined to comment.
Former President Donald Trump in 2020 tried to ban TikTok. But a federal judge blocked the move.
Now, with the new congressional panel, Capitol Hill is ready to step in. The special committee cannot draft legislation, but plans to issue a report by the end of the year with recommendations on US China policy.
Either a ban on TikTok or a forced sale could reduce ByteDance’s value and thus cost US investors. Other costs of prohibition include the potential loss of…
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