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1 1 (May 22, 2024)

handle is hein.crs/govepdj0001 and id is 1 raw text is: Congressional Research Service Informing the legislitive debate since 1914 Updated May 22, 2024 TikTok and China's Digital Platforms: Issues for Congress Congress and U.S. policymakers at the federal and state levels have taken steps to address their national security- related concerns about the People's Republic of China's (PRC or China) influence over PRC digital platforms operating in the United States. Most U.S. actions to date have focused on TikTok, owned by ByteDance, a company with ties to the PRC government. Other expressed concerns include PRC platforms' large user bases, access to large amounts of U.S. data, and company data and content policies. TikTok has an estimated 148.9 million U.S. users as of January 2024. TikTok's CEO testified to Congress in March 2023 that ByteDance retains in the PRC at least seven years of U.S. TikTok users' data. Enacted in April 2024, P.L. 118-50 has provisions that address PRC digital platforms and related data issues. Division H requires ByteDance to divest TikTok and allows the President to address other PRC-controlled digital platforms. Division I prohibits the transfer of U.S. personally identifiable sensitive data to foreign adversaries, including the PRC. PRC digital firms are able to serve the U.S. and PRC markets, while U.S. firms remain restricted in China. This asymmetry raises other issues for Congress, such as market access reciprocity, fair competition, and U.S. regulation of PRC digital firms. China's digital platforms have expanded in the U.S. market over the past 10 years. Many firms have entered otherwise regulated or restricted parts of the U.S. economy-broadcasting, media, health, and finance- through mobile applications (apps). PRC foreign investment and technology restrictions inhibit the ability of U.S. digital platforms to operate in China. Digital platforms are internet-connected and software- based digital spaces that facilitate the exchange of goods, services, and information through online interactions. Chna' PRC policies prioritize the role digital platforms play in China's economic competitiveness, the development of emerging technologies, and PRC global projects in sectors such as communications, smart cities, financial, and logistics services. China's digital platforms emerged in the late 1990s with the help of PRC government policies that restricted U.S. internet services firms from operating in China while promoting alternative PRC competitors. Alibaba began in 1999 as a competitor to Amazon and formed Alipay in 2003 to compete with PayPal. Baidu started as a Google competitor in mapping and search engines. Sina Weibo began as a challenger to Twitter. Tencent's WeChat competed with WhatsApp. In 2016, ByteDance refined the algorithm from its news aggregator business (Toutiao) to launch Douyin (a predecessor-turned companion PRC application to TikTok), a service that competed with Facebook and YouTube. The PRC universe of digital firms has expanded as industry more broadly has adopted digital services, and now includes other firms, such as BGI (biotech) and DJI (drones). As PRC digital firms became viable in China, some moved into global markets. The PRC government allowed some PRC firms to list and expand overseas. In 2014, Alibaba raised $21.8 billion in its offering on the New York Stock Exchange. U.S. investors in TikTok's PRC parent ByteDance include Sequoia Capital, Susquehanna Group, and KKR. Some PRC firms focused on app offerings to enter foreign markets. They used existing foreign operating systems on mobile phones (e.g., Apple's iOS and Google's Android) to avoid upfront technology infrastructure costs and expand quickly. Once established, some PRC firms developed their own infrastructure, such as cloud services, data storage, and semiconductor design. PRC firm Huawei is developing its own operating system. Some PRC firms inherited foreign user bases and licenses through acquisitions. This approach gave some firms, such as ByteDance, a significant initial U.S. market position, and accelerated these firms' expansion. In 2017, ByteDance acquired musicaLly, a short-form video app firm. The deal gave ByteDance 80 million monthly U.S. users-a base that is more than half of TikTok's current user base. ByteDance then used that U.S. user base in launching TikTok. In another example, PRC firm Tencent invested in Snap and Epic Games (the owner of the gaming platform Fortnite). Some firms that are incorporated and/or headquartered in the U.S. and third markets, such as TikTok, have core engineering and technology functions in China and other PRC ties. Temu, founded in Boston, is controlled by a PRC firm. Zoom Video Communications, Inc., founded in California, incorporated in Delaware, and headquartered in the U.S. reports in its FY2024 annual report that a significant portion of our research and development organization resides in China and that we have a significant number of employees, primarily engineers, in China, where personnel costs are less expensive than in many other geographies. Table I. Examples of Digital Platforms in the U.S. Market that have PRC ties PRC Business U.S. Business Sectors ByteDance/Douyin TikTok Social media Tencent WeChat Super app Snap/Snapchat Social media Blizzard, Riot, Epic Gaming Alibaba Alibaba, Alipay E-commerce/payments Baidu Apollo Mapping, autonomy Yidian Yixun Newsbreak News, media PDD Temu E-commerce, clothing Shein Shein E-commerce, clothing Zoom subsidiaries Zoom, Zoom.gov Business software Ship Tech Ship Technology Business software/hotel Binance Binance.US Crypto Source: CRS, with information from media and corporate reports.

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