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1 1 (December 13, 2024)

handle is hein.crs/goverro0001 and id is 1 raw text is: Congressional Research Se~ Informing the legislitive debate s~nee 1914 ice Updated December 13, 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 extent to which the People's Republic of China's (PRC or China) influences digital platforms that are directly or indirectly tied to the PRC and 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. In December 2024, TikTok said in its court filings that it had 170 million U.S. users. 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 (Div. H and Div I) requires ByteDance to divest from TikTok, allows the President to address other PRC-controlled digital platforms, and directs the Federal Trade Commission to enforce provisions that prohibit data brokers from transferring U.S. personally identifiable sensitive data to foreign adversaries, including the PRC. PRC digital firms are able to serve both the U.S. and PRC markets, while PRC investment and technology policies restrict U.S. firms from operating in China. This asymmetry raises issues for Congress about market access reciprocity, fair competition, and U.S. regulation of PRC firms. PRC digital platforms have expanded in the U.S. market over the past 10 years. Many firms have entered regulated or restricted parts of the U.S. economy-broadcasting, media, health, and finance-via mobile applications (apps). Digital platforms are internet-connected and software- based digital spaces that facilitate the exchange of goods, services, and information through online interactions. For this report, PRC digital platforms or platforms that have PRC ties refer to digital platforms that are headquartered in China, subsidiaries, or firms otherwise tied to a company headquartered in China, or whose relevant technology and core business functions (e.g., algorithms, software and technology development, and intellectual property) are based in China, owned by a PRC parent or subsidiary, and/or subject to PRC jurisdiction. In some cases, PRC digital platforms might be incorporated or headquartered outside China. The PRC digital platforms discussed in this report are not exhaustive. Ch nas D ta PIaform Deve oprnent 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. and other foreign 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 competitor 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 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 has launched its own operating system (Harmony OS). Some PRC firms inherited foreign user bases and licenses through acquisitions. This approach gave some firms, such as TikTok's parent 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 almost half of TikTok's current user base. ByteDance then used that U.S. user base in launching TikTok. In another example, Tencent invested in Snap and Epic Games (owner of the gaming platform Fortnite). Some PRC digital platforms, such as TikTok, are incorporated and/or headquartered in the U.S. and third markets, and 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 United States, 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. Select Examples of Digital Platforms in the U.S. Market that have PRC Ties PRC Business U.S. Business Sectors ByteDance/Douyin TikTok Social media

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