TikTok Sale Hits Roadblock as China Stops Sale of AI Algorithm

TikTok’s impending sale to a United States buyer hits a roadblock after China releases restrictions against the selling of its artificial intelligence (AI) algorithm. The announcement made by Chinese officials on Friday, August 28, 2020, comes weeks after TikTok’s negotiations with various interested buyers in the US.

According to Bloomberg, Chinese officials have quietly levied new restrictions against the sale and export of artificial intelligence technology and algorithms last Friday. This puts speech and text recognition, as well as data analytics and content personalization technologies, under the watchful eye of the Chinese government, and therefore, of national security.

The artificial intelligence algorithms reportedly play a big role in determining the content and videos presented on a user’s feed, and which serve an essential role in the success of TikTok, notes Bloomberg.

TikTok Sale Hits Roadblock

Should TikTok proceed with its business strategy to continue its operations in the United States, ByteDance will need to obtain the approval of the Chinese government.

Though Oracle and a joint bid from Microsoft and Walmart are upping the stakes in the TikTok sale as of Monday, August 31, 2020, CNBC reports that the latest restrictions posed new hurdles for the U.S. companies, upping the selling price to around $20 to $30 billion with the AI technology and the algorithm included in the package.

To remedy the situation before the September 15 deadline imposed by President Donald Trump and his administration, Reuters said that ByteDance founder Zhang Yiming is considering a number of options to proceed with the sale.

Among the options being considered by the Chinese parent company for TikTok include directly asking for the Chinese government’s approval to sell the algorithm to the chosen U.S. firm or to proceed with the sale of TikTok without the said AI technologies and algorithm, the latter of which may speed up the sale but would require the new U.S. company to provide its own algorithm as an alternative, reports Reuters.

Besides these options, CNBC states that another option up for consideration is facilitating a transition period with the Committee on Foreign Investment in the United States (CFIUS), which could be poised to take up to a year.

However, Reuters notes that this transition period may not be allowed under the new regulations imposed by the Chinese government.

The last option revolves around the new U.S. buyer to directly license the said technology and algorithm from ByteDance itself. However, this might pose worries for the CFIUS who want to steer clear of TikTok and its relationship with parent company ByteDance.