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How Will MNC’s Respond to the Challenge of Nationalism?,

August 31, 2020 | Expert Insights

TikTok, a video app, has tremendous popularity, particularly in the U.S. and Western Europe. It is the first Chinese social media platform to gain significant traction outside the home country. In the first three months of this year, it was downloaded an astonishing 315 million times. In terms of quarterly downloads, TikTok has surpassed all other apps in history.

This app enables users to create short video clips (3-60 sec), with music, lip-sync, dance, and comedy features. As a TikTok user, one can create enhanced video clips of oneself and share the same with friends and the internet. In 2017, the app was launched for iOS and Android mobile phones. As of August 2020, TikTok has an estimated one billion users, worldwide.


On August 7, U.S. President Donald Trump issued an executive order banning all transactions with ByteDance, the Chinese company that owns TikTok. Other apps such as TenCent and WeChat are also to be banned in the next 45 days.

Mr. Trump, in fact, took a cue from India. On June 29, the Government of India decided to block 59 Chinese apps, including TikTok. For India, the trigger for the ban was apparently the face-off with the People's Liberation Army (PLA), at Galwan Valley, in which 20 Indian soldiers lost their lives.  However, the official reason for the ban, proffered by both India and the U.S., is to protect privacy and citizen’s data from being surreptitiously transferred to servers outside the country.


TikTok has consistently denied any wrongdoing or flouting of any domestic laws. It claims that host country data is only stored in servers inside the host country. It even went to the extent of saying that even if the People's Republic of China (PRC) were to attempt seizing the data, the company would resist. In the U.S., the ban was imposed invoking the President’s emergency powers. If the violation of national security is not proven, it is possible that TikTok might sue the U.S. government for violating the 1st Amendment Rights of U.S. customers. However, even if TikTok were to pursue a legal course, it would be a long and expensive process.


At the end of 45 days, the banned apps will no longer be available at popular online play stores in the U.S. In India, the ban went to effect immediately and overnight the app disappeared from Play Store and Apple Store.  Further, internet service providers will be told to block the app. Of course, it is expected that both in India and the U.S., TikTok will be provided with an opportunity to defend itself against the allegations. However, since the allegations relate to national security, the proceedings of national commissions may remain questionable for transparency and impartiality.


Microsoft has confirmed that it is in talks with ByteDance, to buy TikTok’s U.S. operations. Even Mr. Trump has said that he would not oppose such a deal. However, Yiming Zhang, Founder and CEO of ByteDance, has said no decision on the matter had been taken as yet.


Many U.S. MNCs have benefitted from trans-Pacific collaborations with the PRC. Microsoft was one of the early pioneers to benefit from the PRC’s competitive advantage in manufacturing. The recent trend of imposing national security restrictions on MNCs (such as Huawei and ByteDance) is certain to have an adverse impact on global operations. How will MNCs adapt to this new challenge? For the present, Microsoft’s offer to buy TikTok’s U.S. operations appears to be one way to adapt to the new challenge.


In India’s case, the actual reason for banning TikTok was the killing of 20 Indian soldiers in the Galwan Valley. In the U.S., the reason was the amassing of U.S. wealth by a foreign competitor. However, in both cases, the official reasons were to protect citizen's privacy and personal data from being surreptitiously transferred overseas, possibly to PRC intelligence agencies.

How will this dichotomy in reasoning manifest? TikTok is expected to robustly defend itself before respective national investigation commissions. But, they may be advised (by national intelligence) not to clear the Chinese MNC on the grounds of national security. If that be the case, no matter how well TikTok defends itself, the ban is likely to prevail.

If, on the other hand, the governments of India and the U.S. had been upfront about the true reasons for the ban, more innovative solutions might have been forthcoming. Perhaps, TikTok would distance itself from the PLA action in Galwan Valley and even condemn the killing of Indian soldiers. In the U.S. case, it might even agree to retain its U.S. earnings in the U.S., for a particular period of time, enabling America to benefit from its multiplier effect (offset clause).

Perhaps, government spokespersons should reconsider their positions from the perspective of their own national interests. As Indians, we could draw inspiration from our national motto, inscribed under our national emblem, ‘Satyameva Jayate’ – Truth always Triumphs.