Washington’s moves should be seen in context of U.S.-China tech rivalry

The United States’ efforts to clamp down on the popular short video-sharing app, TikTok, can only be understood in the wider context of the fight for technological dominance with China, a cybersecurity expert said. 

TikTok is owned by Chinese tech firm ByteDance and has grown in popularity over the years, especially among younger users. As of April, the app has been downloaded more than 2 billion times globally across Apple’s App Store and Google Play, according to data from Sensor Tower. 

Last month, U.S. Secretary of State Mike Pompeo said that the U.S. was looking at banning TikTok and other Chinese social media apps over national security concerns. 

“It’s not clear to me that there is a huge security risk,” Adam Segal, director of the digital and cyberspace policy program at the Council on Foreign Relations, told CNBC’s “Squawk Box Asia” on Monday. He said that China likely already has access to large amounts of U.S. citizens’ data through hacks carried out against government agencies and companies like credit ratings agency Equifax and others. 

“The risk on propaganda and influence might be more but I think the larger context is … the Trump administration really wants to push back on China’s rise as a tech competitor to the United States,” Segal added. 

For its part, TikTok has said U.S. user data is stored in the country itself with a backup in Singapore and that its data centers were located outside China, implying their information was not subjected to Chinese law. But, experts have pointed to existing legislation in China which could force local Chinese companies like ByteDance and others to hand over data to Beijing.

“I think there are legitimate concerns there, even if the law doesn’t say that,” Segal said, explaining that intelligence services in China can work around the law and get access to the information. He said there may be reasons for the U.S. to ask federal employees, Defense department officials and others working in sensitive jobs to keep the app off their phones.

“But, again, the data of 15-year-olds who are dancing around doesn’t have very clear national security implications.” 

Late Sunday, tech giant Microsoft confirmed that it held talks with ByteDance to acquire TikTok’s U.S. operations. The two companies are looking a potential deal that would involve Microsoft buying TikTok in the United States, Canada, Australia and New Zealand. Microsoft said it may also offer other U.S. investors to get involved in the acquisition. The company did not disclose deal terms but said CEO Satya Nadella has spoken with President Donald Trump. 

The Committee on Foreign Investment in the United States gets to have oversight on all of the acquisition negotiations between the two companies, which is “very unusual,” according to Theresa Payton, CEO of Fortalice Solutions and a former White House chief information officer. 

“I doubt most companies are used to having the federal government have a seat at the table, but they will, and they can actually reject the deal,” Payton told CNBC’s “Street Signs Asia” on Monday. She explained that the companies would have to show that they can quickly divest the infrastructure and show that the data will be transferred and only stored in servers in the U.S. or risk having the deal blocked. 

“There’s a lot that still has to be worked through as well as some of the retroactive looking at how was the data treated. That can all be on the table and it will be very interesting to see what the final decision is, what the final deal looks like,” Payton added. 

Trump told reporters on Friday that he would act soon to ban TikTok from the U.S. and that he didn’t support the spinoff deal involving Microsoft, NBC News reported. But, the president appeared to have agreed to give both companies 45 days to negotiate a deal, Reuters reported citing three sources familiar with the matter.