To err is human

To really foul things up requires a communist dictatorship

Last updated: 1/15/2025

As we await the US Supreme Court’s judgment on the constitutionality of the law that requires TikTok’s divestiture from ByteDance, its Chinese owner, I find myself reflecting on the significant error the Chinese government has made—errors that were once rare but are becoming more common in recent years.

The law behind TikTok’s crisis

The Protecting Americans from Foreign Adversary Controlled Applications Act functionally bans TikTok from operating in the United States if it remains a “foreign adversary controlled application” on January 19, 2025. The law enjoys bipartisan support and passed Congress by a significant margin. I won’t get into the specifics of the US government’s motivations other than to say I find the national security merits of the case to force TikTok’s divestiture from ByteDance to be compelling. The Chinese government has effective control of sensitive data for more than 170 million Americans as long as one of its companies owns TikTok. Instead, I want to focus on how the Chinese government has poorly played a poor hand.

The obvious solution is for ByteDance to sell TikTok and reinvest the profits (which could amount to hundreds of billions of dollars) into artificial intelligence research and development. The law is an explicit incentive to do so. The problem is that the US government isn’t the only one directing ByteDance’s actions. The Chinese government has repeatedly mandated that ByteDance go dark in the United States rather than sell during this five-year-long saga.

Supreme Court showdown

A judgment from the US Supreme Court is expected any day now. The Court is not going to rule in TikTok’s favor. Foreign corporations do not enjoy the free speech rights of American citizens. For a free speech argument to apply here, TikTok’s lawyers would have to prove that American citizens are being harmed by government censorship of speech that they would like to hear on the basis of the government’s regulation of the speech itself. That is not at all what is happening. The US government has made no legalistic judgment regarding speech on TikTok as part of this law. It purely focuses on TikTok’s foreign ownership, and there is a robust legal precedent for regulating foreign ownership of communications platforms.

The idea that since TikTok is a US-registered subsidiary of a foreign corporation, it should enjoy the same free speech protections as American citizens, is ridiculous, both based on legal precedent and common sense. It’s even more ridiculous considering these arguments are coming from a Chinese company without any sense of irony that American social media platforms have zero meaningful presence in China.
The only reason ByteDance is in this position is because the Chinese government has blocked the most obvious solution—a sale—to this point. They will not win in front of the Supreme Court as the facts of the case are clearly on the side of the US government. By taking this down to the January 19th deadline or past it (and hoping for an executive reprieve), they are lowering the price of TikTok. That value destruction will not fully recover.

China’s strategic miscalculation

In its mandate to ByteDance, the Chinese government missed that there are three paths forward. One, ByteDance sells TikTok—which they probably should have done years before Congress passed this law. Two, ByteDance does not sell TikTok, and when it is banned those users primarily end up on American social media platforms. Three, ByteDance hopes for salvation from President Trump, who has expressed an interest in a “political resolution” that would likely require the Chinese government to make some sort of meaningful, public concession. Those are the only three options.

Based on those options, what does the Chinese government get by dragging this case out for years? It’s exceedingly difficult to understand. Their position has been clear since at least August 2020, when they took steps to block any sale for the sake of “flexing their muscles and saying, ‘We get a say in this and we’re not going to be bystanders,’” as my former CSIS colleague Scott Kennedy commented at the time. The Chinese government has been known for much of the past four decades for its technocratic decision-making and long-term strategic orientation. Flexing muscles for the sake of flexing does not suggest technocracy in action.

At least two specific bids were publicly known at the time: Oracle and a joint effort from Microsoft and Walmart. Consider if the Chinese government evaluated those bids and formulated a response based on a long-term assessment of AI’s importance to national strategy. ByteDance and its investors could have collected as much as $50 billion for TikTok in the fall of 2020, two years before the launch of ChatGPT. Imagine if ByteDance had entered the generative AI era with a war chest of $50 billion for cutting-edge AI chips (which Chinese companies still had access to at the time), world-leading generative AI research talent (which Western firms were not yet in frenzied competition over), and generative AI product development. I shudder to think about what ByteDance could have done with that money and what the global competitive landscape for generative AI would look like today.

A new era of policy errors

To come back to my opening point, these kinds of errors from the Chinese government used to be rare. They have become more common. It lies in the vanity behind much of the Xi-era prideful policymaking that is wildly out of step with his three immediate predecessors, whose outcome-oriented policies collectively lifted China out of ruin and returned it to the global stage as a major power. Is senior leadership not getting the kinds of accurate, nuanced, and well-reasoned assessments that used to underpin successful policy? Or are they still getting the same quality of information and just don’t care?

In the end, this protracted battle over TikTok underscores the new reality: Beijing’s strategic miscalculations are becoming increasingly frequent—and costly. The damage is done with TikTok. The Chinese government must come up with something to offer President Trump if ByteDance is to have any hope of retaining ownership. In the future, barring some self-reflection at the highest levels of government, China’s increasingly habitual mistakes will present opportunities for its competitors.