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1 1 (April 19, 2024)

handle is hein.crs/govepdm0001 and id is 1 raw text is: Congressionol Research Service nforming the IegisI9tive debate since 1914 6 April 19, 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-tied 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. In March 2024, the House passed H.R. 7521, which would require ByteDance to divest TikTok. In April 2024, Speaker of the House Mike Johnson added the bill to a legislative package that includes aid for Ukraine and Taiwan. PRC digital firms are able to serve both the U.S. and PRC digital markets, while U.S. firms remain restricted in China. This asymmetry raises other potential 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. (Table 1). Many firms have entered otherwise regulated or restricted parts of the U.S. economy- broadcasting, media, health, and financial services- through mobile applications (apps). PRC restrictions on foreign firms and investment in related technology sectors 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 and the creation of value through online interactions of businesses and individuals. Ch na's Dtgka- P atform evelopment 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 loosened capital restrictions and 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 initially focused on app offerings to enter foreign markets. In this approach, PRC firms 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. In other approaches, 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 Blizzard Entertainment, Snap (Snapchat), Riot Games, and Epic Games (the owner of Fortnite, a large gaming and online marketplace platform). Table I. Key PRC Digital Platforms in the U.S. Market PRC Firm U.S. Business Sectors ByteDance TikTok Tencent WeChat Snap/Snapchat Blizzard, Riot, Epic Alibaba Alibaba, Alipay Baidu Apollo Yidian Yixun Newsbreak Temu Temu Shein Shein Zoom Shiji Tech Binance Zoom, Zoom.gov Shiji Technology Binance.US Social media Super app Social media Gaming E-commerce/payments Mapping, autonomy News, media E-commerce, clothing E-commerce, clothing Business software Business software/hotel Crypto Source: CRS, with information from media and corporate reports. PRC nfluence and Control Since 2014, the PRC government and the Communist Party of China (CPC) have adopted interrelated laws, economic security measures, and data restrictions that enhance their control over data and commercial activity, within and outside of China. They have expanded data localization requirements and placed controls on the export of data and

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