Updated April 22, 2024
TikTok and China’s Digital Platforms: Issues for Congress
Congress and U.S. policymakers at the federal and state
of digital firms has expanded as industry more broadly has
levels have taken steps to address their national security-
adopted digital services, and now includes other firms, such
related concerns about the People’s Republic of China’s
as BGI (biotech) and DJI (drones).
(PRC or China) influence over PRC-tied digital platforms
As PRC digital firms became viable in China, some moved
operating in the United States. Most U.S. actions to date
into global markets. The PRC government loosened capital
have focused on TikTok, owned by ByteDance, a company
restrictions and allowed some PRC firms to list and expand
with ties to the PRC government. Other expressed concerns
overseas. In 2014, Alibaba raised $21.8 billion in its
include PRC platforms’ large user bases, access to large
offering on the New York Stock Exchange. U.S. investors
amounts of U.S. data, and company data and content
in TikTok’s PRC parent ByteDance include Sequoia
policies. TikTok has an estimated 148.9 million U.S. users
as of January 2024. TikTok’s CEO testified to Congress
Capital, Susquehanna Group, and KKR. Some PRC firms
in
initially focused on app offerings to enter foreign markets.
March 2023 that ByteDance retains in the PRC at least
seven years of U.S. TikTok users’ data
In this approach, PRC firms used existing foreign operating
. In March 2024, the
systems on mobile phones (e.g., Apple’s iOS and Google’s
House passed H.R. 7521, which would require ByteDance
Android) to avoid upfront technology infrastructure costs
to divest TikTok. In April 2024, Speaker of the House Mike
and expand quickly. Once established, some PRC firms
Johnson added the bill to a legislative package that includes
developed their own infrastructure, such as cloud services,
aid for Ukraine, Israel, and Taiwan.
data storage, and semiconductor design. PRC firm Huawei
PRC digital firms are able to serve both the U.S. and PRC
is developing its own operating system.
digital markets, while U.S. firms remain restricted in China.
In other approaches, some PRC firms inherited foreign user
This asymmetry raises other potential issues for Congress,
bases and licenses through acquisitions. This approach gave
such as market access reciprocity, fair competition, and
some firms, such as ByteDance, a significant initial U.S.
U.S. regulation of PRC digital firms. China’s digital
market position, and accelerated these firms’ expansion. In
platforms have expanded in the U.S. market over the past
2017, ByteDance acquired musical.ly, a short-form video
10 years. (Table 1). Many firms have entered otherwise
app firm. The deal gave ByteDance 80 million monthly
regulated or restricted parts of the U.S. economy—
U.S. users—a base that is more than half of TikTok’s
broadcasting, media, health, and financial services—
current user base. ByteDance then used that U.S. user base
through mobile applications (apps). PRC restrictions on
in launching TikTok. In another example, PRC firm
foreign firms and investment in related technology sectors
Tencent invested in Blizzard Entertainment, Snap
inhibit the ability of U.S. digital platforms to operate in
(Snapchat), Riot Games, and Epic Games (the owner of
China.
Fortnite, a large gaming and online marketplace platform).
Digital platforms are internet-connected and software-
Table 1. Key PRC Digital Platforms in the U.S. Market
based digital spaces that facilitate the exchange of goods,
PRC Firm
U.S. Business
Sectors
services, and information and the creation of value through
ByteDance
TikTok
Social media
online interactions of businesses and individuals.
Tencent
WeChat
Super app
Snap/Snapchat
Social media
China’s Digital Platform Development
Blizzard, Riot, Epic
Gaming
PRC policies prioritize the role digital platforms play in
Alibaba
Alibaba, Alipay
E-commerce/payments
China’s economic competitiveness, the development of
Baidu
Apol o
Mapping, autonomy
emerging technologies, and PRC global projects in sectors
Yidian Yixun
Newsbreak
News, media
such as communications, smart cities, financial, and
Temu
Temu
E-commerce, clothing
logistics services. China’s digital platforms emerged in the
Shein
Shein
E-commerce, clothing
late 1990s with the help of PRC government policies that
Zoom
Zoom, Zoom.gov
Business software
restricted U.S. internet services firms from operating in
Shiji Tech
Shiji Technology
Business software/hotel
China while promoting alternative PRC competitors.
Binance
Binance.US
Crypto
Alibaba began in 1999 as a competitor to Amazon and
Source: CRS, with information from media and corporate reports.
formed Alipay in 2003 to compete with PayPal. Baidu
PRC Influence and Control
started as a Google competitor in mapping and search
engines. Sina Weibo began as a challenger to Twitter.
Since 2014, the PRC government and the Communist Party
Tencent’s WeChat competed with WhatsApp. In 2016,
of China (CPC) have adopted interrelated laws, economic
ByteDance refined the algorithm from its news aggregator
security measures, and data restrictions that enhance their
business (Toutiao) to launch Douyin (a predecessor-turned
control over data and commercial activity, within and
companion PRC application to TikTok), a service that
outside of China. They have expanded data localization
competed with Facebook and YouTube. The PRC universe
requirements and placed controls on the export of data and
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TikTok and China’s Digital Platforms: Issues for Congress
algorithms. In 2021, they introduced security review
operate in the U.S. market. The revised provisions in House
requirements for PRC firms listing or operating overseas.
Speaker Johnson’s package incorporate requests from some
These provisions require firms to adhere to PRC rules when
Senators that the bill allow a year, instead of six months, for
they conflict with U.S. laws. PRC measures seem to be
any divestiture. Members also have debated how much
more extensive than other countries’ approaches to data
discretion to give the President to make determinations and
security. Such measures have affected U.S. firms’
whether Congress should take broader actions to protect
operations in China, raising questions about the extent to
U.S. data and oversee digital firms. In other bills, H.R. 4108
which PRC-tied firms operating offshore are independent of
and S. 1974 would subject certain U.S. personal data
the PRC government. Examples of PRC authorities include:
transfers to export controls. S. 85 and H.R. 503 would
•
require federal agencies to remove TikTok from devices. S.

China’s National Security Law (2015) requires
information systems in China to be “secure and
686 would give the Commerce Secretary authorities in
controllable.”
statute similar to those in E.O. 14034 (see text box).
The law underpins requirements that
U.S. firms store data and cryptographic keys in China.
Key U.S. Government Actions
• The PRC’s National Cybersecurity Law (2017)
The U.S. government has taken the fol owing actions to
requires firms to store personal information and data
restrict some operations of certain PRC digital firms:
within China. The law builds on related requirements
to place PRC data and related infrastructure in China.
May 2019: Executive Order (E.O.) 13873 declared a national
• China’s Data Security Law (2021) covers data
emergency to secure U.S. information and communications
processing inside and outside China if it “harms the
technology and services supply chains. The E.O. has been
national security, public interest, or the legitimate
renewed annually since 2019. It is up for renewal in May 2024.
rights and interests of citizens or organizations of the
January 2020-present: Some federal agencies and state
PRC.” The law requires PRC government approval for
governments banned the TikTok app on government devices.
the transfer of data stored in China. It calls for
March 2020: A Presidential Order required PRC firm Shiji
classifying data according to its importance to China’s
Technology to divest StayNTouch, a U.S. software provider. It
economic development and national security interests.
•
did not ban the firm from operating in the U.S. market.

In August 2020, the PRC government placed export
controls on algorithms used in social media platforms.
August 2020: A Presidential Order required ByteDance to
Some experts saw this as an effort to influence TikTok
divest Musical.ly/TikTok under the Committee on Foreign
and other PRC digital firms’ offshore operations.
Investment in the United States (CFIUS) authorities. TikTok is
contesting the Order in court. Since February 2021, the case
The CPC requires all firms to house a Party committee that
has been in abeyance at the request of the parties.
is empowered to attend board meetings and be part of
August 2020: E.O. 13942 and E.O. 13943 (later rescinded)
decision-making. The PRC government is also an indirect
restricted the U.S. operations of TikTok and WeChat. Court
shareholder in some firms. For example, it holds a board
injunctions blocked their implementation.
seat in Douyin Information Services Co., Ltd (the owner of
TikTok’s core technology) via a 1% shareholding by a firm
January 2021: E.O. 13971 provided for scrutiny of apps and
backed by China’s internet regulator. Other PRC tools to
software developed or control ed by PRC firms.
influence PRC digital platform firms include:
June 2021: E.O. 14034 replaced E.O. 13942 and E.O. 13943.
It created a Commerce Department program to address risks
PRC official content guidelines and censorship rules
of foreign adversary-owned internet-tied and software firms.
restrict and promote content on PRC digital platforms.
China’s anti-espionage, cybersecurity, and data security
H.R. 7521 would allow the President to authorize a
laws compel firms to support PRC state security authorities.
“qualified divestiture” of TikTok and impose terms. The
August 2020 Presidential Order that required ByteDance to
The core business (e.g., software and technology
divest musical.ly may inform a “qualified divestiture.” In
development) and intellectual property is based in China,
referring the matter to the President, CFIUS “unanimously
owned by a PRC parent or subsidiary, and subject to PRC
recommended” such action expressly “to protect U.S. users
jurisdiction. Offshore structures (e.g., global headquarters)
from exploitation of their personal data.” TikTok tried to
can obfuscate ties to this underlying PRC business.
Issues Before Congress
reopen a mitigation path that CFIUS determined was not
viable by legally challenging the Order, mostly on due
The executive branch has taken steps to restrict some PRC
process issues, and re-publicizing mitigation ideas. Some
digital firms’ operations (Text Box). Congress has debated
experts say TikTok could store data in the United States and
various approaches and is focused on H.R. 7521. In March
allow government monitoring. Others say such terms would
2024, the House passed H.R. 7521, which would designate
not address ties to technology and functions in China,
TikTok as a “foreign adversary-controlled application” and
including regular software updates and continuous data
require Byte Dance to sell TikTok to a non-PRC owner.
transmission. Congress might: a) exercise oversight over
The bill focuses on specific PRC-related national security
any divestiture; b) examine whether TikTok’s legal
concerns and conduct of the platform and would allow
challenge suggests any statutory or policy gaps; and c)
TikTok to operate under new ownership. Proponents of the
consider whether to act with regard to other PRC platforms.
bill say that such an approach is designed to withstand a
potential court challenge and responds to congressional
Karen M. Sutter, Specialist in Asian Trade and Finance
deliberations that highlighted a need to address national
Michael D. Sutherland, Analyst in International Trade and
security risks while allowing TikTok a path to continue to
Finance
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TikTok and China’s Digital Platforms: Issues for Congress

IF12640


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