WMT Walmart Inc

By Liza Lin 

TikTok's Chinese owner said it is seeking approval from Beijing for a White House-endorsed plan to turn the short-video app into a U.S.-based company, officially placing the fate of the year's hottest social-media asset in the hands of Chinese authorities.

ByteDance Ltd. said Thursday that it had submitted its plan, which involves partnering with Oracle Corp. and Walmart Inc., to commerce authorities in the Chinese capital under recently expanded export restrictions and is awaiting a decision.

China's ministries in charge of commerce, and science and technology introduced surprise changes to the country's list of restricted exports in August, adding data-processing technologies such as content-recommendation algorithms in a move widely seen as an effort to frustrate a campaign by President Trump to force a sale of TikTok on national-security grounds.

Technologies on the list can't be exported without approval from local Chinese officials. TikTok, and several of ByteDance's social-media apps in China are well known for their use of algorithms and artificial intelligence to tailor and push content to its users, helping them build a sizable following.

Gao Feng, a spokesman for China's Commerce Ministry, said Thursday in a weekly briefing that Beijing's commerce bureau had received Bytedance's application for technology export. Mr. Gao said the bureau would handle it according to regulations.

ByteDance spokespeople didn't immediately respond to a request for comment for more details. The Beijing-based technology company has said in the past that it would have to go through standard regulatory approvals in China and the U.S.

The submission for Chinese-government approval adds to ambiguity surrounding the TikTok deal, in which ByteDance, Oracle and Walmart are set to turn the viral short-video app into a new company called TikTok Global. The companies involved have issued clashing accounts of how the deal would be structured. Meanwhile, Mr. Trump has wavered in his support after saying he had approved the deal in concept.

China's state media have added to the confusion by slamming the deal as "dirty and unfair" after the editor of an influential Communist Party tabloid offered cautious praise for it.

China's government hasn't commented on the deal since Mr. Trump first said he had blessed it. Under the preliminary agreement, TikTok's algorithm wouldn't change hands, the company has said.

ByteDance might still need to seek a green light from the government even if the deal doesn't involve the direct transfer of algorithms, as the export restrictions cover other forms of technology sharing, including licensing of algorithms, said Fang Jianwei, a partner at Zhong Lun Law Firm in Shanghai. With the deal evolving, there could be parts that might fall under the law, and thus ByteDance might want to play it safe by running it by relevant authorities, he added.

Chinese state media have taken issue with the potential loss of control over a highly valuable social-media property. Under the terms of the preliminary agreement, Oracle and Walmart would take a combined 20% stake in TikTok Global. ByteDance said it would own the remaining 80%, while Oracle issued a statement saying that Americans would be the majority owners of the restructured firm and ByteDance would have no ownership in the new company.

China's official Xinhua News Agency became the latest to pile on, calling the U.S. move to force ByteDance to sell the buzzy social-media app "modern piracy" in an editorial published Thursday.

"The U.S. pirate logic holds that any successful company that is not American will have to become America's," Xinhua said. "In trying to realize this goal, the U.S. is willing to bend accepted rules and abuse national instruments to recklessly suppress others."

Since a ban on the app in India during border tensions with China earlier this year, the U.S. has become TikTok's biggest overseas market, with roughly 100 million users. If ByteDance can't get both governments to approve the deal, it will likely have to shut down its U.S. operations.

Winston Ma, a former managing director at China Investment Capital, the nation's sovereign-wealth fund, said the two countries had different expectations about what "control" of the app means, a divergence that could lead the Chinese to reject the deal.

China's government would likely accept an arrangement in which Oracle manages the data while leaving the technology and operational control in ByteDance's hands, said Mr. Ma, now an adjunct professor at New York University's School of Law. "But the new term sheet discussion suggests the U.S. will have majority or full ownership of the company. It's an expectation gap to close."

Grace Zhu contributed to this article.

Write to Liza Lin at Liza.Lin@wsj.com

(END) Dow Jones Newswires

September 24, 2020 03:42 ET (07:42 GMT)

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