Following the introduction of the new security law in Hong Kong in July 2020, The TikTok Team announced that they have discontinued operating TikTok in Hong Kong. While the Hong Kong market is negligibly small for TikTok and pulling out of it would not bring substantial financial impact to ByteDance, being banned by India weeks ago hits it hard as India is the largest overseas market of TikTok with more than 200 million users. Soon after, the US claimed it is looking into banning Chinese social media Apps over the concern of national security.

In spite of the fact that many Chinese tech companies tapping into overseas markets tried to stay out of political issues at all cost and focus on pure business, they have been caught up in the crossfire of politics. 

While it is struggling with the political backlash, menacing local mimics and global tech giants are ready to grasp this perfect opportunity to replace it. The banning of TikTok resulted in a surge in download of Indian short video Apps like Chingari and Roposo. Meanwhile, Facebook-owned Instagram announced the expansion of Reel, a rival to TikTok to India and YouTube is planning to launch a TikTok-like function “Shorts” this year. Can TikTok successfully fight over its life to return to its major market and safeguard its market share?

ByteDance put great efforts into separating the operation of TikTok with its Chinese home company. TikTok hires a large number of foreign talents, from engineers to the senior management team, builds data centres overseas, searches for headquarters outside China and releases transparency reports regularly. 

Despite their attempts to desensitise and prompt response to concerns of overseas governments stating that it will never disclose user data to the Chinese government and there has been no such request, it still faces continuous scepticism and criticism. 

At this stage, it seems that not much could be done further to address the allegations. Will TikTok simply wait for the frosty relationship to warm while putting more focus on other markets or proactively come up with more ways to overcome the adversity?

It is becoming harder and harder for Chinese companies to avoid political issues when operating in oversea markets. Given that the Chinese market is more or less saturated, there is no doubt that they will continue to seize opportunities to go global. Nonetheless, they may assess the political risks more thoroughly, consider countries with good relationships with China as first expansion destinations and explore overseas markets through mergers and acquisitions or investing in local companies instead.

 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.