March 27, 2023
Shou Zi Chew’s testimony to US congress did little to persuade sceptical politicians that TikTok is not a Trojan horse for the Chinese Communist Party to gather information on its more than 1 billion users globally.
The Singaporean TikTok chief faced bipartisan fury in Washington on Thursday in what was billed as a make-or-break moment for the app. While many TikTokers posted videos that labelled politicians as dinosaurs, the app’s critics viewed his testimony as providing more weight to calls for a US ban. That could be the first domino to fall in what has become a multinational push to clamp down on the wildly popular video sharing service.
That’s not to say the US and UK-educated former Goldman Sachs banker didn’t try his hardest to reassure US lawmakers, and indeed the rest of the world, that TikTok can be trusted and has no association with the CCP.
“A lot of risks that are pointed out are hypothetical and theoretical risks,” Chew told the committee early on Friday morning. “I have not seen any evidence. I’m eagerly waiting on discussions where we can talk about evidence, and we can then address the concerns that are being raised.”
Following Chew’s testimony the Chinese government said it “has never and will not require companies or individuals to collect or provide data located in a foreign country”. This is unlikely to persuade most Western politicians from criticising TikTok.
Back in Australia, the government is poised to announce its plan for TikTok after Home Affairs and Cybersecurity Minister Clare O’Neil, last September, asked her department to investigate social media apps, data harvesting, and companies such as TikTok and WeChat, with links back to authoritarian states. The Home Affairs investigation was handed to O’Neil last week.
TikTok, which is owned by Chinese technology firm ByteDance, is pushing back against a growing chorus of critics, from political decision makers to national and cybersecurity commentators and data harvesting experts. Their central claim is simple: due to its ownership structure and laws that force Chinese companies and individuals to cooperate with the party, they allege the CCP can use the app to track and access the data of millions of users.
TikTok’s executives assert it is caught between the world’s two major superpowers, the US and China, where geopolitical rivalries, trade, Taiwan and technology have deeply hurt relations.
TikTok was launched in 2017 and has experienced explosive growth since ByteDance bought lip-syncing music app Musical.ly for $US1 billion ($1.5 billion) and merged the two services in 2018. It now has more than 1 billion active users globally, including an estimated 7 million Australians, and is leaving rivals including Facebook in the dust.
TikTok has been banned on government-issued staff devices by Canada, the US and the European Commission. Australia is likely to join. Earlier this month, the Biden administration threatened to ban TikTok in the US if ByteDance doesn’t sell the app to a non-Chinese owner, something it has resisted since the Trump administration first proposed such a move.
But a forced sale has its own problems. Beijing changed its export control rules in 2020, which effectively prevents the sale of TikTok’s algorithm, the engine behind its success.
The Australian government has already indicated it will not put a nationwide ban in place, something that has been threatened in the US. However, a growing list of people believe the government may reconsider depending on what happens in the US.
“We have to consider that if it’s not possible to mitigate the national security risks by any other means, if banning is the only option to protect Australians, then we have to keep that on the table,” Liberal senator, and outspoken TikTok critic, James Paterson tells The Australian Financial Review and 60 Minutes.
TikTok’s year from hell began after a report in the US that was based on leaked audio from 80 internal TikTok meetings. The June 2022 BuzzFeed report revealed TikTok employees stating in internal meetings that “everything is seen in China” and that there was a Beijing-based engineer with “master admin”.
For years, TikTok has assured increasingly nervous governments that user data is safe. It is stored in the US and Singapore, TikTok has often repeated, that is out of reach of Chinese authorities.
Handed his first computer when he was 12 years-old, Thomas Perkins was a natural. Before long, he was pulling it apart and putting it back together. After joining the US military, he used his spare time in war zones to teach himself code.
That choice would take Perkins from the US infantry to government and the private sector. He would start his own business, which in December 2021 was bought by Canberra-based cybersecurity and intelligence firm Internet 2.0.
By mid-2022 Perkins, who is based in the US, cracked the code of the world’s fastest growing social media app, revealing just how much TikTok can collect on its more than 1 billion users. Perkins said it took him three weeks, and very little sleep, to crack the app’s code.
“I’m an obsessive person. If I start something, I like to go as deep as I can into it and get all the facts. I’m very factual,” Perkins says. “My job is to provide the facts of what’s happening. That’s what I do and what you do with that information is up to you.”
In July 2022, the Financial Review revealed Internet 2.0’s analysis. It showed TikTok checks its users’ device location at least once an hour; continuously requests access to contacts even if the user originally denies; can map a device’s running apps and all installed apps; and more, as part of broad permissions asked of users.
TikTok rejects many of Internet 2.0’s findings and called it “an entity with a commercial agenda”. It claims many criticisms are motivated by xenophobia.
Many apps, including Facebook, Twitter, Instagram and Google Maps collect huge amounts of data, including location. That data has often been misused, including by UK-based consulting firm Cambridge Analytica, which infamously used data from Facebook for political targeting ahead of the 2016 US presidential election.
Internet 2.0’s research came just five days after this masthead obtained a letter from TikTok admitting to Paterson that Australian user data is accessible in mainland China.
Then TikTok had its nightmare moment. It had to admit that employees used the app to spy on journalists. In December, US publication Forbes revealed ByteDance tracked a number of journalists in an attempt to find sources for a series of stories exposing TikTok’s links to China.
TikTok denied the initial reports by Forbes in October, claiming its app could not monitor US users the way the media outlet suggested. It also attacked the reporting in tweets, stating it lacked “both rigour and journalistic integrity”. However, ByteDance now acknowledges its previous claims were false.
Brendan Carr, a Republican member of the US Federal Communications Commission and vocal critic of TikTok, says the company has been “gaslighting” governments across the world and left people with the impression data could not be seen in China.
“You’ve got these internal communications that show that is not the case at all. I think that is deeply concerning. Aligned with the fact that they’ve now had to admit that they were using the app, contrary to terms of service, to surveil the location of specific American journalists writing about it.”
The Federal Bureau of Investigation and Department of Justice are now investigating the matter.
Western nations are concerned about the Chinese government’s control over its technology industry. The CCP has increasingly used so-called golden shares in local arms of powerful technology businesses to give it greater formal control over companies, including TikTok’s parent ByteDance, and e-commerce giants Alibaba and Tencent, which owns WeChat.
The stakes in the companies, which are usually around 1 per cent of a local entity, give the party a range of rights. For ByteDance, the Chinese government took a 1 per cent stake in a Chinese-based entity called Beijing ByteDance Technology in April 2021. TikTok Australia is owned by TikTok Ltd, which is registered in the Cayman Islands and is owned by the Cayman Islands domiciled ByteDance, which is a shell company. The Chinese government does not have shares in Cayman Islands-based ByteDance and TikTok entities.
Chinese companies often set up variable interest entities (VIE), a structure which allows Chinese firms to get capital from offshore and foreign investors to get access to China. This is because in most Chinese industries, foreign ownership is banned. ByteDance, which is headquartered in Beijing, has set up a VIE shell company in the Cayman Islands to obtain foreign investment. VIEs set up by Chinese companies generally give various controls of assets and claims on profits to the Cayman Islands firms.
The Chinese government’s golden share stake in Beijing ByteDance Technology is held by WangTouZhongWen (Beijing) Technology, a firm owned by three Chinese state enterprises.
“The largest beneficial owners of this 1 per cent stake are the State-owned Assets Supervision and Administration Commission [or SASAC, which oversees state enterprises], China Media Group, and the Cyberspace Administration of China,” according to a submission by Rachel Lee, Prudence Luttrell, Matthew Johnson and John Garnaut, a former China correspondent at The Sydney Morning Herald and The Age and advisor to former prime minister Malcolm Turnbull, to the Senate Select Committee on Foreign Interference through Social Media from March 14.
The golden share arrangement also gave the government the ability to appoint CCP official Wu Shugang to Beijing ByteDance Technology’s three-person board.
The report detailed TikTok’s links to the CCP as well as the crossover in leadership between TikTok and Douyin, the Chinese version of the app which is also owned by ByteDance.
TikTok is often at pains to separate itself from ByteDance and Douyin. The CCP holds a tight grip over information within the mainland.
In December, a Financial Review investigation revealed how local branches of the party, government agencies and other arms of the Chinese security apparatus use apps such as Douyin and other media to spread propaganda about Xinjiang to its own citizens.
Among a range of other data, intelligence and security legislation, China’s National Intelligence Law of 2017 requires all organisations and citizens to “support, assist and co-operate with the state intelligence work”.
“Organisation” is a broad term and has been interpreted as all Chinese companies, global subsidiaries of Chinese companies, and Chinese subsidiaries of global companies, although the laws would not be able to compel the overseas parent to co-operate with the laws.
“In our view, ByteDance should now be understood as a ‘hybrid’ state-private entity,” Lee, Luttrell, Johnson and Garnaut wrote. They said the corporate structures show TikTok is owned by ByteDance which is a company from the People’s Republic of China, and ByteDance is subject to influence, guidance and de facto control which the CCP subjects all Chinese tech companies to.
TikTok rejects the senate committee submission and says it is filled with factual inaccuracies.
“TikTok’s parent company ByteDance Ltd. was founded by Chinese entrepreneurs, but today, roughly 60 per cent of the company is owned by global institutional investors such as Carlyle Group, General Atlantic, and Susquehanna International Group,” a spokeswoman said.
“An additional 20 per cent of the company is owned by ByteDance employees around the world. The remaining 20 per cent is owned by the company’s founder, who is a private individual and is not part of any state or government entity.”
TikTok Australia general manager Lee Hunter argues criticism of the company and its ties to China is xenophobic.
“There’s a lot of misinformation out there. We’re not headquartered in Beijing. TikTok is not a Chinese company. Our parent company ByteDance is incorporated outside of China. I think what we see out there is a lot of association with China that’s just not true,” Hunter tells 60 Minutes.
Asked about TikTok’s submission to the senate inquiry where it notes and says it is proud of its Chinese heritage, Hunter responds, “we’re not affiliated with the Chinese Communist Party. I think this is something that needs to be corrected.”
The TikTok app, available through most of the western world, is not available in China, although ByteDance operates a similar app Douyin. The majority of western social media platforms including Facebook, Twitter, Instagram, YouTube, and Snapchat are banned in China.
Hunter believes TikTok is being unfairly singled out among social media companies.
“I think that’s bordering on xenophobia. I think we need to be really careful with some of the ways that we are investigating anything that’s associated with China at the moment,” Hunter says.
“For us, we’re an entertainment platform. That’s what we are. I think the millions of Australians that are on TikTok every day that love us, the hundreds of people you saw in the office today, I think, also, this community of Chinese Australians that we have, I think they should be asking questions of these politicians that are attacking anything that’s associated with China.”
Robert Potter, co-chief executive of Internet 2.0, says he doesn’t believe it’s xenophobic to lower our privacy expectations and to be “concerned about specifically written legislation that gives an authoritarian country the power to do things that we’d genuinely not trust our own democratic government to do”.
“I genuinely agree that there has been xenophobic commentary about China, I don’t think this meets the threshold because there are very specific things about this that we have concerns about,” says Potter, who has worked as an Australian political advisor and cybersecurity advisor to the US State Department.
“I’m just as concerned about privacy of Chinese citizens as I am about Australian ones. I’m not confident that I would want to live in China under their privacy laws. I’m not comfortable that people in China want to live under those privacy laws.”
Social media companies have been some of the worst offenders in scraping user data for profits. There is a huge amount of data willingly handed over, as well as a web of permissions users grant apps without knowing the full extent of what is being handed over due to complex terms and conditions that usually go unread.
In early 2020, the Australian information commissioner and privacy commissioner began court action against Facebook over potential breaches of privacy related to the Cambridge Analytica scandal from 2018.
Hunter says other platforms collect more than TikTok, including Google and Meta.
“The information that we collect is really clearly spelled out in our privacy policy. And it’s there to give you the best experience on TikTok,” Hunter says. “The reason why we want to know your email address or your phone number is to verify who you are. The reason why we want to know what city you’re living in is to give you content that’s unique to your experience.”
Paterson acknowledges Facebook, Instagram, Twitter and Google all track us, largely in attempts to give us targeted advertising to make a profit, but those companies are headquartered in liberal democracies.
“TikTok is different. It’s subject to an authoritarian government, and not just any authoritarian government, the largest authoritarian government in the world, China, and one which has been trying to economically coerce Australia, and which is responsible for record levels of foreign interference and cyberattacks on our country,” he says.
“That means we have to think about our relationship with TikTok completely differently to how we think about our relationship with other apps headquartered in Western countries.”
FFC member Carr believes Australia and the US will eventually align their policies on TikTok and reckons they are heading in one direction.
“Historically, we have a great Five Eyes relationship with Australia ,” says Carr, referring to the intelligence-sharing arrangement both countries are part of. “We are on the same page when it comes to these security threats. I’d be surprised, playing this out a few months, if the US and Australia ended in materially different positions when it comes to TikTok.”
“Obviously, each country has to make its own mind up. India has gone forward with a full ban of TikTok. Taiwan has a ban in place on public government devices ... Australia makes its own decisions on this, based on its own considerations and security assessment. I wouldn’t purport to tell government officials there what to do. But, it does seem like, directionally, this is ending in one way.”
The government is expected to announce its plan to tackle security risks posed by social media, including banning TikTok on government-issued devices. A broader response across social media is also expected.
“It was really heartening to hear ... Clare O’Neil say that they’re not considering a ban of TikTok. I think anything that would be considered around action like that should be based on facts, should be based on evidence and deliberation,” Hunter says.
“We’re committed to working with the government around that. I think a lot of the accusations that we’re seeing at the moment aren’t based on evidence, they’re not based on facts.”
Potter doesn’t believe a blanket ban of TikTok is the right approach.
“I think there’s a place where TikTok shouldn’t operate. I think it’s showing us that in government, on government phones, things like that, that’s a no-brainer that they shouldn’t be there,” Potter says.
“But it’s for us to set our standards of privacy. Not for us to decide to ban an app. We as a country make a decision about what should operate here because we set standards and hold companies accountable to them. And if they don’t meet those standards, then they have to leave,” he adds.
“I’m not for banning individual platforms, but I am for setting standards that if they can’t meet, they can’t be here. I’d say that the onus is on TikTok to explain how it respects our privacy. And if it doesn’t comply with our general expectations of privacy, it’s up for them to leave.”
