President Donald Trump signed an Executive Order on Aug. 6 requiring ByteDance Ltd. to sell the popular social media app, TikTok, potentially to Microsoft Corporation, or else the app would be banned in the U.S. The popular messaging app, WeChat, owned by Tencent Holdings Limited, was also banned in the U.S. per the Executive Order.

Privacy & Security

This comes after concerns about the security of the two popular apps and how they handle American consumers’ data. NBC reported, “TikTok has had major privacy concerns flare up in the past and is reportedly under investigation by the Justice Department and Federal Trade Commission for potentially failing to adequately delete videos from users who are 13 and under, as required by law.” 

Another report by CNBC stated that “Chinese internet giant Tencent has reportedly been surveilling content posted by foreign users on its wildly popular messaging service WeChat in order to help it refine censorship on its platform at home.”

Another China-based company, Huawei, has also faced a ban in the U.S. over privacy concerns. Huawei, just this year, became the largest phone maker in the world. The telecom company was banned from both the United Kingdom and United States’ 5G network because of the company’s ties to the Chinese government. The Trump Administration, as well as the FCC, recently worked to limit Huawei’s business with American consumers because of “its coziness with the Chinese government”, reported CNET.

Intellectual Properties

During President Trump’s campaign, he often referenced how much money the U.S. was losing to China. One of his key points was the amount of revenue U.S. companies were losing to intellectual property theft in China. The USTR reported in 2018 that “Chinese theft of American IP currently costs between $225 billion and $600 billion annually.” That is why intellectual property protection is a major factor in the U.S.-China Trade Agreement.

Intellectual property continues to be an important aspect in the administration’s policy. In May, President Trump issued a proclamation restricting the visas of any graduate-level foreign exchange students that were supporting China’s Military-Civil Fusion (MCF) strategy. The MCF aims to eliminate “barriers between China’s civilian research and commercial sectors, and its military and defense industrial sectors”, according to the Bureau of International Security and Nonproliferation.

In 2017, the U.S. Trade Representative (USTR) put Alibaba Group Holding Ltd., owner of the popular Chinese e-commerce website,, on its blacklist for the second year in a row over suspected counterfeits. In a statement by the USTR, Alibaba’s “criminal referral of infringing sellers led to the arrest of 1,752 suspects and the closure of 1,282 manufacturing and distribution centers, and Alibaba itself brought 48 civil lawsuits against counterfeiters.”

China-based Stocks

Now that China-based tech firms are all facing legal restrictions, the future of the market in China looks like slower growth. After Huawei was banned, the company’s annual profit growth came to 5.65%, which was significantly lower than the previous year of 25%. The company cited U.S. restrictions as reasons for the lower than expected growth.

Bytedance made a net profit of $3 billion from $17 billion in revenue in 2019 and reported $5.6 billion in revenue during the first three months of 2020. Bloomberg reported that the company could IPO at a valuation between $95 billion and $140 billion.

Tencent holds large stakes in many U.S. firms, and they also have ownership of Riot Games, the creator of League of Legends. Tencent reported $13.5 billion in net income in 2018. The tech firm posted Q1 2020 earnings with a 22.26% annual increase in revenue.

The Trump Administration has also been putting pressure on Chinese firms to be more transparent with their financial reporting. A law that passed the U.S. Senate and is waiting for approval in the House would require Chinese companies to meet accounting transparency standards or will be delisted from the U.S. market. Investor’s Business Daily stated that if “signed into law, it could lead to an exodus out of U.S. markets by about 170 Chinese stocks worth well over $1 trillion.”

Shares in both Tencent and Alibaba declined in early August by 12% and 7% respectively from August 3rd to August 10th. On August 25th, CNBC reported that mainland Chinese stocks “led losses among the region’s major markets, with the Shanghai Composite down 1.3% to close at about 3,329.74 while the Shenzhen component declined 1.763% to finish its trading day at around 13,428.40. Hong Kong’s Hang Seng index was little changed on the day at 25,491.79.”

The only company that seems to be unphased by the Trump Administration’s policies is Alibaba,  which rose 6% from the markets opening on Monday the 25th to its close on Friday the 28th.

Written ByAllen LaNear

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