TikTok Lives: US, China Reach Deal

Beijing has said the US spin-off of TikTok to be sold to American investors in a deal orchestrated by President Donald Trump will use parent company ByteDance’s Chinese algorithm.

Wang Jingtao, deputy head of China’s powerful cyber security regulator, on Monday said US and Chinese officials had agreed a framework that included “licensing the algorithm and other intellectual property rights”.

He said ByteDance would “entrust the operation of TikTok’s US user data and content security”, without elaborating.

TikTok’s powerful recommendation algorithm has been at the heart of a geopolitical tug of war over the short-video app since the first Trump administration, when Beijing unveiled export controls on algorithms to thwart a forced sale of the app.

The artificial intelligence algorithm underpins the app’s prized ability to serve up addictive videos tailored to individual users, but has also raised fears among national security hawks that it could be manipulated to push Chinese propaganda or polarising material to users.

US officials have insisted any deal must ensure TikTok’s recommendation algorithm is fully severed from ByteDance, warning continued co-operation could allow Beijing to maintain influence over the content seen by Americans.

It remains unclear to what extent TikTok’s Chinese parent would retain control of the algorithm in the US as part of a licensing deal.

An Asia-based investor of ByteDance said the new US TikTok entity would use at least part of the Chinese algorithm but train it in the US on American user data. “Beijing’s bottom line is a licensing deal,” said the investor. “Beijing wants to be seen as exporting Chinese technology to the US and the world.”

“It’s the ultimate Taco trade,” said one US adviser close to the deal, referring to the acronym “Trump always chickens out”. “After all this, China keeps the algorithm.”

American and Chinese officials reached a framework agreement on Monday after two days of talks in Madrid to hammer out a deal that would keep the Chinese-owned app online in the US.

The Trump administration has repeatedly intervened to keep TikTok available despite US law that required ByteDance to divest its American operations of the app or face a nationwide ban.

China’s top two trade negotiators, vice-premier He Lifeng and deputy commerce minister Li Chenggang, indicated Beijing would approve the export of TikTok’s algorithm.

Separately, US Treasury secretary Scott Bessent said the spun-off app would be controlled by American investors but preserve some “Chinese characteristics”.

Another person familiar with the matter said TikTok had been developing a standalone US app in anticipation of a deal but was keen to ensure that content generated by American users would still be available to users in the “rest of the world” app and vice versa.

Ahead of a previous April deadline, the White House was close to an agreement that would have spun off US TikTok into a company receiving new investment, potentially diluting the stakes of Chinese investors.

Under the terms of that deal, investors, including Andreessen Horowitz and Blackstone, would have owned about half of TikTok’s US business, while large existing investors, including General Atlantic, Susquehanna and KKR, would have held about 30 per cent of the new entity.

As part of that deal, Oracle, which already stores the personal data of American users on its US cloud servers, would have taken a small holding in the new business and also been responsible for securing the US app’s data.

Trump on Tuesday said his government had been talking to a “group of very big companies” that want to buy TikTok.

It is unclear if the broad contours of the new deal will match the April proposal. However, new investors are expected to join the consortium, said people familiar with the matter, after some investors such as Blackstone pulled out.

Some analysts have said the algorithm must be fully operated by the US entity to meet the requirements of the divest-or-ban law signed by then-president Joe Biden last year. That would preclude a licensing deal with ByteDance.

But the law allows the US president to determine if ByteDance has fully divested from TikTok, giving Trump the power to approve the deal.