Updated April 25, 2024
TikTok and China’s Digital Platforms: Issues for Congress
Congress and U.S. policymakers at the federal and state
competed with Facebook and YouTube. The PRC universe
levels have taken steps to address their national security-
of digital firms has expanded as industry more broadly has
related concerns about the People’s Republic of China’s
adopted digital services, and now includes other firms, such
(PRC or China) influence over PRC-tied digital platforms
as BGI (biotech) and DJI (drones).
operating in the United States. Most U.S. actions to date
As PRC digital firms became viable in China, some moved
have focused on TikTok, owned by ByteDance, a company
into global markets. The PRC government loosened capital
with ties to the PRC government. Other expressed concerns
restrictions and allowed some PRC firms to list and expand
include PRC platforms’ large user bases, access to large
overseas. In 2014, Alibaba raised $21.8 billion in its
amounts of U.S. data, and company data and content
offering on the New York Stock Exchange. U.S. investors
policies. TikTok has an estimated 148.9 million U.S. users
as of January 2024. TikTok’s CEO testified to Congress
in TikTok’s PRC parent ByteDance include Sequoia
in
Capital, Susquehanna Group, and KKR. Some PRC firms
March 2023 that ByteDance retains in the PRC at least
seven years of U.S. TikTok users’ data
initially focused on app offerings to enter foreign markets.
. Enacted in April
In this approach, PRC firms used existing foreign operating
2024, P.L. 118-50 has provisions that address PRC digital
systems on mobile phones (e.g., Apple’s iOS and Google’s
platforms and related data issues. Division H requires
Android) to avoid upfront technology infrastructure costs
ByteDance to divest TikTok and allows the President to
and expand quickly. Once established, some PRC firms
address other PRC-controlled digital platforms. Division I
developed their own infrastructure, such as cloud services,
prohibits the transfer of U.S. personally identifiable
data storage, and semiconductor design. PRC firm Huawei
sensitive data to foreign adversaries, including the PRC.
is developing its own operating system.
PRC digital firms are able to serve the U.S. and PRC digital
In other approaches, some PRC firms inherited foreign user
markets, while U.S. firms remain restricted in China. This
bases and licenses through acquisitions. This approach gave
asymmetry raises other potential issues for Congress, such
some firms, such as ByteDance, a significant initial U.S.
as market access reciprocity, fair competition, and U.S.
market position, and accelerated these firms’ expansion. In
regulation of PRC digital firms. China’s digital platforms
2017, ByteDance acquired musical.ly, a short-form video
have expanded in the U.S. market over the past 10 years.
app firm. The deal gave ByteDance 80 million monthly
(Table 1). Many firms have entered otherwise regulated or
U.S. users—a base that is more than half of TikTok’s
restricted parts of the U.S. economy—broadcasting, media,
current user base. ByteDance then used that U.S. user base
health, and financial services—through mobile applications
in launching TikTok. In another example, PRC firm
(apps). PRC restrictions on foreign firms and investment in
Tencent invested in Blizzard Entertainment, Snap
related technology sectors inhibit the ability of U.S. digital
(Snapchat), Riot Games, and Epic Games (the owner of
platforms to operate in 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
https://crsreports.congress.gov
TikTok and China’s Digital Platforms: Issues for Congress
requirements and placed controls on the export of data and
Senators to allow up to one year for any divestiture.
algorithms. In 2021, they introduced security review
Members debated how much discretion to give the
requirements for PRC firms listing or operating overseas.
President to make determinations and whether Congress
These provisions require firms to adhere to PRC rules when
should protect U.S. data and oversee digital firms more
they conflict with U.S. laws. PRC measures seem to be
broadly. In response, P.L. 118-50 allows the President to
more extensive than other countries’ approaches to data
restrict other foreign adversary-controlled apps—including
security. Such measures have affected U.S. firms’
PRC-tied digital platforms—and prohibits the transfer of
operations in China, raising questions about the extent to
U.S. personally identifiable sensitive data to a foreign
which PRC-tied firms operating offshore are independent of
adversary country, or an entity controlled by a foreign
the PRC government. Examples of PRC authorities include
adversary, including the PRC. The Federal Trade
•
Commission is to enforce the data provision.
China’s National Security Law (2015) requires
information systems in China to be “secure and
controllable.” The law underpins requirements that
Key U.S. Government Actions
U.S. firms store data and cryptographic keys in China.
The U.S. government has taken the fol owing actions to
• The PRC’s National Cybersecurity Law (2017)
restrict some operations of certain PRC digital firms:
requires firms to store personal information and data
May 2019: Executive Order (E.O.) 13873 declared a national
within China. The law builds on related requirements
emergency to secure U.S. information and communications
to place PRC data and related infrastructure in China.
•
technology and services supply chains. The E.O. has been
China’s Data Security Law (2021) covers data
renewed annually since 2019. It is up for renewal in May 2024.
processing inside and outside China if it “harms the
national security, public interest, or the legitimate
January 2020-present: Some federal agencies and state
rights and interests of citizens or organizations of the
governments banned the TikTok app on government devices.
PRC.” The law requires PRC government approval for
March 2020: A Presidential Order required PRC firm Shiji
the transfer of data stored in China. It calls for
Technology to divest StayNTouch, a U.S. software provider. It
classifying data according to its importance to China’s
did not ban the firm from operating in the U.S. market.
economic development and national security interests.
•
August 2020: A Presidential Order required ByteDance to
In August 2020, the PRC government placed export
divest Musical.ly/TikTok under the Committee on Foreign
controls on algorithms used in social media platforms.
Investment in the United States (CFIUS) authorities. TikTok is
Some experts saw this as an effort to influence TikTok
contesting the Order in court. Since February 2021, the case
and other PRC digital firms’ offshore operations.
has been in abeyance at the request of the parties.
The CPC requires all firms to house a Party committee that
August 2020: E.O. 13942 and E.O. 13943 (later rescinded)
is empowered to attend board meetings and be part of
restricted the U.S. operations of TikTok and WeChat. Court
decisionmaking. The PRC government is also an indirect
injunctions blocked their implementation.
shareholder in some firms. For example, it holds a board
January 2021: E.O. 13971 provided for scrutiny of apps and
seat in Douyin Information Services Co., Ltd (the owner of
software developed or control ed by PRC firms.
TikTok’s core technology) via a 1% shareholding by a firm
backed by China’s internet regulator. Other PRC tools to
June 2021: E.O. 14034 replaced E.O. 13942 and E.O. 13943.
influence PRC digital platform firms include
It created a Commerce Department program to address risks
of foreign adversary-owned internet-tied and software firms.
PRC official content guidelines and censorship rules
restrict and promote content on PRC digital platforms.
P.L. 118-50 allows the President to authorize a “qualified
divestiture” of TikTok and impose terms. The August 2020
China’s anti-espionage, cybersecurity, and data security
Presidential Order that required ByteDance to divest
laws compel firms to support PRC state security authorities.
musical.ly may inform a “qualified divestiture.” In referring
the matter to the President, CFIUS “unanimously
The core business (e.g., software and technology
recommended” such action
development) and intellectual property is based in China,
expressly “to protect U.S. users
from exploitation of their personal data.”
owned by a PRC parent or subsidiary, and subject to PRC
TikTok tried to
jurisdiction. Offshore structures (e.g., global headquarters)
reopen a mitigation path that CFIUS determined was not
can obfuscate ties to this underlying PRC business.
viable by legally challenging the Order, mostly on due
Issues Before Congress
process issues, and re-publicizing mitigation ideas. Some
experts say TikTok could store data in the United States and
The executive branch has taken steps to restrict some PRC
allow government monitoring. Others say such terms would
digital firms’ operations (Text Box). P.L. 118-50 designates
TikTok as a “foreign adversary
not address ties to technology and functions in China,
-controlled application” and
including regular software updates and continuous data
requires Byte Dance to sell TikTok to a non-PRC owner. It
transmission. Congress might: a) exercise oversight over
focuses on specific PRC-related national security concerns
any divestiture; b) examine whether TikTok’s legal
and conduct of the platform and allows TikTok to operate
challenge suggests any statutory or policy gaps; and c)
under new ownership. Proponents have said that this
consider whether to act with regard to other PRC platforms.
approach was designed to withstand a potential court
challenge and respond to congressional deliberations that
highlighted a need to address national security risks while
Karen M. Sutter, Specialist in Asian Trade and Finance
allowing TikTok a path to continue to operate in the U.S.
Michael D. Sutherland, Analyst in International Trade and
market. The provisions incorporated requests from some
Finance
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TikTok and China’s Digital Platforms: Issues for Congress
IF12640
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