The TikTok CEO has something to say to the Biden administration and the U.S. Congress: Selling TikTok is not the answer to U.S. national security concerns about the popular video app TikTok.
CEO Zhou Shouzi said in an interview that spinning off TikTok from its Chinese owners, an action the U.S. is now demanding, would provide no more security than the multibillion-dollar plan TikTok has already proposed Assure. TikTok’s proposed plan involves hiring a U.S. partner, Oracle Corp. , to store data on U.S. users and protect the video content Americans watch on the app from any Chinese interference.
He said in an interview at TikTok’s WeWork office in Washington that he would welcome feedback if there were other risks that could not be addressed through TikTok’s plans. So far, he said, no problems have been identified that cannot be practically addressed through the program.
The Wall Street Journal reported late Wednesday that the Joe Biden administration is asking TikTok’s Chinese owners to sell the company. After the report was published, TikTok said in a statement that the forced sale would not help address any security risks the United States perceives. “Divestitures will not solve the problem: the change of ownership will not impose any new restrictions on data flow or access to data.”
In the next few days, Zhou Shouzi will have the opportunity to directly explain the above reasons to the US Congress. Zhou Shouzi is a reserve officer in Singapore who has worked for Goldman Sachs. He is scheduled to testify before the House Energy and Commerce Committee next Thursday.
In the interview, Zhou Shouzi would not say whether the founder of TikTok parent Bytedance Ltd. was willing to sell. Zhou said the founders own 20 percent of the company, though the super-voting shares give them significant voting power. TikTok executives have said the other 60% of ByteDance is held by global investors and 20% by employees.
ByteDance executives have informed Chinese government officials of the U.S. government’s divestiture request, the sources said. Chinese officials reiterated their previous guidance that the tech giant should protect its overseas operations and intellectual property, the sources said.
Chinese Foreign Ministry spokesman Wang Wenbin said at a regular press conference on Thursday that the U.S. should stop spreading false information on data security issues and stop unreasonably suppressing relevant companies. He said: “The United States has so far failed to produce evidence to prove that TikTok threatens US national security.”
In the interview, Zhou Shouzi ruled out the possibility of TikTok conducting an IPO in the short term. Some politicians have said that reducing Chinese ownership of TikTok could address their national security concerns. Zhou Shouzi said that he and ByteDance have been actively considering the listing of TikTok, but also believe that now is not the right time.
Zhou Shouzi said that there is no specific plan yet.
TikTok will invest billions of dollars to move the company’s user data to servers in the United States and Europe over several years and hire independent monitors; The company’s video-picking algorithms are immune to outside influence.
Some officials in the Biden administration and some members of Congress have said that TikTok may open a potential technical back door for the Chinese government to obtain information on American users. Chinese law requires Chinese companies to assist the government on national security matters, they said. That could force TikTok’s parent company, ByteDance, to hand over user data or adjust what TikTok pushes to U.S. users, they said. ByteDance is headquartered in Beijing.
Zhou Shouzi countered that his infrastructure spending would make that impossible. The spending plan is known in the United States as “Project Texas”.
Zhou Shouzi said in this interview that the purpose of the Texas plan is to make it impossible for Chinese law or any legal provisions to come into play, because companies will control the data of American users and put it where they cannot touch it.
TikTok has previously stated that Chinese government agencies have never asked TikTok to assist in espionage or sabotage activities, and if it received such a request, TikTok would not comply. Zhou Shouzi said that he recognizes the concerns of critics, saying that these problems are not unique to TikTok, and he hopes that critics can seriously evaluate the Texas project realistically.
“You guys are talking about real concerns right now, and I think Texas is the real solution,” Zhou said.
Zhou Shouzi will become the CEO of TikTok in 2021. He took over the role following the departure of Kevin Mayer. Mayer was once a well-known executive at the Walt Disney Company (DIS). Mayer stepped down after just three months at the helm of TikTok amid the Trump administration’s attempt to force a sale of TikTok to an American company.
Two years after Zhou took office, the federal government and most states have now banned the use of TikTok on government-issued devices. Although the Biden administration recently suspended the Trump administration’s attempt to ban TikTok from operating in the United States, Congress has long considered this move.
Zhou Shouzi is based in TikTok’s office in Singapore. He said he arrived in Washington last week to acclimate and prepare to testify before Congress. TikTok has hired an experienced Washington consultant to respond to criticism. TikTok’s workforce in Washington is growing so fast that the company is already planning to move out of leased WeWork space and into the company’s own offices that are currently under construction.
Zhou Shouzi said that the reason why TikTOk is not yet profitable is because he spent so much money building these data sovereignty projects around the world.
Zhou Shouzi said that these costs are worth it. For all the money spent, TikTok could turn profitable quickly, he said. Some executives at ByteDance and TikTok have said the U.S. government has offered to sell because of billions of dollars spent over two years on the Texas program to address U.S. security concerns, according to people familiar with the matter. They were disappointed by the new requirement for shares.
Zhou said he and his team have come up with the Texas plan, named after TikTok’s software partner, Oracle, which is based in Austin, Texas. The Texas plan envisions that all data from U.S. users will be stored in Oracle’s systems, and Oracle engineers can also independently monitor TikTok’s video recommendation system.
The Texas plan also includes hiring U.S. government-approved employees and board members to manage the TikTok U.S. subsidiary that will be established. TikTok has proposed a similar plan for its European operations, dubbed “Project Clover,” which includes building a data storage system in Ireland. TikTok said that in addition to initial implementation costs, the annual operating costs of the Texas plan and the Clover plan are around $1 billion.
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