TikTok’s survival in the US depends on ownership restructuring to remove Chinese control under the new federal law.
Algorithm licensing remains the toughest hurdle, as China’s export rules restrict outright technology transfer abroad.
The success of the final agreement hinges on strong compliance, robust data security safeguards, and effective US oversight mechanisms.
The United States and China have announced a new framework that allows TikTok, owned by ByteDance, to continue operating under an adjusted ownership model. The earlier proposal aimed to remove what was described as “foreign adversary control,” permitting only a limited US stake in the company.
Under the new arrangement, the US authorities will exercise greater oversight of data management and security. However, TikTok’s algorithm will be governed by Chinese regulations.
The agreement is designed to ease tensions surrounding data protection, national security, and foreign influence. Still, the framework may raise further concerns in legal and regulatory discussions.
The act was passed in April 2024, envisaging the dispossession of Foreign Adversary Controlled Applications from their US operations, or their ban.
It has set a deadline of January 19, 2025, for divestment; otherwise, TikTok will face removal from US app stores and other consequences. The enforcement of this law was directed at ByteDance. In Garland (2025), the US Supreme Court dismissed constitutional challenges posed to the law, including free speech.
China instituted export-control laws (amended in 2020) covering technologies such as recommendation algorithms. ByteDance must obtain the Chinese government’s approval before transferring or licensing any technologies based on such algorithmic systems overseas.
Chinese authorities have recently emphasized that all transactions must comply with Chinese law, including safeguards for national security, the avoidance of coercive transfers, and the protection of their enterprise rights.
The approval and deal-closure process will likely involve the following steps:
The US and Chinese officials need to reach an agreement on clarifying the division of control: the extent of the US investor ownership, the status of ByteDance’s stake, and whether ByteDance retains access to or control of the algorithm and associated IP.
Due to export control, Chinese law has to enable the algorithm or any ‘core technologies’ to be transferred or licensed. China also has to approve the changes of ownership in its regulators of commerce/technology.
The US executive branch has already postponed enforcement several times as negotiations are ongoing. Agencies such as the Department of Commerce, the Justice Department, and possibly the offices in charge of foreign investment reviews (CFIUS or their equivalent) would have to screen security protections.
PAFACA is a congressional law; legislators will most likely review any agreement to ensure that it meets the legal specifications, including full or qualified divestiture, lack of foreign adversary control, and safeguarding of user information, among others.
If everyone concurs, effectuating the agreement will entail creating a US-based company, relocating assets, possibly rebuilding or re-licensing algorithms, establishing data storage and content moderation in accordance with the US standards, and so on. Timing: 30-45 days to close once terms are finalized.
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Even with a framework in place, several issues could hinder or complicate the transaction:
The algorithm/recommendation engine is considered ByteDance's most prized IP, and China's rules treat such technology as sensitive. It is still not clear whether China will permit full transfer (or safe licensing). If the US access persists through licensing instead of complete ownership, Congress or the US security personnel may find that inadequate.
ByteDance's ownership: in reported accounts of the transaction, ByteDance would maintain ~19.9% ownership, with the US investors owning ~80%. The percentage is significant, as PAFACA mandates the removal of foreign adversary control. The determination of how a 19.9% stake qualifies is based on the definition of 'control.'
US: It may be difficult to define what constitutes ‘control’ or ‘foreign adversary control.
China: Understanding export-control regulations & what 'technology transfer,' licensing, etc., means to China
Timing: Numerous deadlines have been postponed, raising concerns about executive authority and potential delays.
The US legislators remain concerned about whether user data from the United States can continue to be accessed by China after the agreement, as well as whether algorithms might be used for propaganda or influence efforts. Even operational or structural authorizations may not alleviate all these concerns.
The agreement has to meet both the US domestic political interests (Congress, public) and Chinese domestic policy interests (technology control, internal regulation). Differences over trade (tariffs), technology nationalism, and geopolitics might slow or alter any agreement. Moreover, domestic US judicial or political resistance might occur.
Once a transaction is negotiated, enforcement of compliance will be vital, including maintaining data within the US jurisdiction, maintaining control over algorithms, and establishing mechanisms for oversight, among other key considerations. Without rigorous verification, opponents point out the risk remains.
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The TikTok deal between the US and China involves a tightrope act. It primarily has to keep TikTok functioning for 170 million US users while not banning it outright, in theory, applying the US national security law (PAFACA).
On the other hand, it has to comply with Chinese export control, avoid core technologies, and address concerns over foreign adversary control. The law provides a framework, but many key details are still undecided.
Questions around algorithm control, ownership stakes, compliance, and oversight remain unresolved. The entire scenario will only become clear with the release of the final agreement, and whether it fully addresses the US legal and security requirements.
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1. What is the TikTok US-China agreement?
The agreement reshapes the ownership of TikTok to decrease the control of ByteDance, makes the US compliant with the PACAFA Act, and provides data protection measures, enabling the TikTok app to remain in operation in the US under supervision.
2. What is the PACAFA Act?
The Protecting Americans from Foreign Adversary Controlled Applications (PACAFA) Act requires foreign adversary-controlled apps, such as TikTok, to divest ownership or face bans, thereby safeguarding US national security and user information from potential foreign control.
3. What impact does algorithm control have on TikTok's deal?
TikTok's algorithm for recommendations is a sensitive piece of intellectual property. China limits its transfer, meaning the US deal must be conducted through licensing, which raises questions about control, compliance, and whether the app fully complies with US security standards.
4. Will TikTok US users' data be safe?
Yes. The deal requires strict US-based data storage, access controls, and continuous monitoring by US authorities to prevent foreign access or abuse of user data, in accordance with the PACAFA Act.
5. When will the TikTok deal be closed?
The timing of the deal hinges on both the US and China regulatory approvals. Finalizing terms such as ownership, algorithmic licensing, and compliance will ascertain whether TikTok complies with all legal requirements and security protocols