- Trump signs exec. orders banning U.S. transactions with WeChat, ByteDance
- Order goes into effect in 45 days, will likely mean apps disappear from stores
- White House clarifies order doesn't affect other Tencent companies/interests
- U.S. Dept. of State has released guidelines to purge China's influence on internet
Citing threats to the national security, foreign policy, and economy of the U.S., President Trump has issued executive orders prohibiting American companies from doing any business with China's Tencent and ByteDance, the parent companies of messaging apps WeChat and TikTok. The orders will go into effect in 45 days and will likely mean the apps disappear from U.S. app stores. Expect lawsuits challenging the orders to be announced soon.
"Like TikTok, WeChat automatically captures vast swaths of information from its users," says one order. "This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information." It also alleges the Chinese government can use the apps to to keep tabs on Chinese citizens visiting the U.S. "who may be enjoying the benefits of a free society for the first time in their lives."
Hong Kong-listed Tencent stock dropped 5% on the news, the company losing $35 billion in market cap, and the benchmark CSI 300 index closed 1.15% lower. There was some confusion on how the restrictions apply to Tencent, which has stakes in or owns a dizzying array of gaming companies, but a White House official confirmed to the LA Times that the order only blocks transactions related to WeChat. A ban on WeChat would effectively shut down a communication channel for people in the two countries. It also hurts U.S. companies, which will be barred from advertising on the app or using it for e-commerce.
Ban Comes Ahead of Trade Meetings
The orders, which China called "using state power to oppress non-American businesses," come a little over a week before trade officials from both countries meet to review implementation of their Phase 1 trade deal. China's Foreign Minister yesterday said the country rejects any attempt to artificially create a so-called "new Cold War." Two consulates, one on each side, have been closed as tensions rise, and U.S. Secretary of State Michael Pompeo this week released a wide-ranging list of guidelines for American companies called "The Clean Network program" to purge Chinese influence from the internet. They aren't forced to follow them, at least for now.
Chinese companies recently saw almost 60 of their apps, including WeChat and TikTok, banned in India as well. Proponents of a free and open internet fear the move towards a "splinternet," a cyberspace that is fractured and controlled and regulated by different governments. Tim Berners-Lee, the British computer scientist who invented the World Wide Web in 1989, said, "The decision to make the Web an open system was necessary for it to be universal. You can't propose that something be a universal space and at the same time keep control of it."
China is probably most guilty of this, with the authoritarian government controlling which search engines and websites and information people within its borders can access. Censorship and gaining access to geo-restricted content is one of the reasons global demand for Virtual Private Networks (VPN) is exploding. It increased over 40% worldwide in March as lockdowns were put in place, according to reviewer Top10VPN.com. Amazingly, 10 of the 20 most popular free VPN mobile apps in the U.S. are Chinese-owned.