Illustration: Aïda Amer/Axios

Chinese social media is largely impenetrable for most in the West — just check out their memes — but Sino tech giants have their eye on owning the U.S. market, evidenced by the rise of TikTok.

Why it matters: While the video-based app simply seems like a benign platform for Gen Zers to make and share funny memes, it's could become a Chinese vacuum for coveted American data.

Between the lines: TikTok's "parent company, ByteDance, recently valued at more than $75 billion, bills itself first as an artificial intelligence company, not a creator of mission-driven social platforms," per the New York Times. Its secret sauce: "Apparently you just … show [users] things, and let a powerful artificial intelligence take notes."

  • Ceding that control to TikTok should be worrying, according to a Times op-ed: "Those who complain that American firms like Facebook are invasive and unaccountable are unlikely to prefer China’s tech giants, which are often cowed by, and collaborating with, the Party-State’s opaque and irascible censorship and surveillance apparatus."
  • And you can't escape Chinese social media giants on American platforms. As Axios' Sara Fischer reported, ByteDance spent $1 billion advertising TikTok in the U.S. in 2018, growing its audience by buying ads on Facebook, Instagram and Snapchat.
  • A similar privacy controversy played out this week with FaceApp, which is owned by a Russian startup, over its use of photos and possible access to users' photo libraries.

The state of play: There are even possible national security concerns, as New America's Graham Webster told Axios' Erica Pandey, "Say there’s a sensitive U.S. military officer with a kid who's making memes on TikTok. Is it possible that there’s data being collected through that usage that could be useful to a Chinese intelligence service? Yeah, that’s possible. But we haven’t seen evidence of that yet."

  • Earlier this year, the Chinese company that purchased the gay dating app Grindr was forced to agree to sell the company by 2020 and had restrictions placed on its access and use of data by the Committee on Foreign Investment in the U.S. (CFIUS) due to national security concerns, per Bloomberg.
  • CFIUS doesn't have to publicly announce its work and can review companies and deals without being asked — meaning it could already have its all-powerful regulatory eye on ByteDance and TikTok.

The other side: TikTok says that its "user data is stored and processed in the U.S. and other markets where TikTok operates at industry-leading third-party data centers. It’s important to clarify that TikTok does not operate in China and that the government of the People's Republic of China has no access to TikTok users' data."

  • Yes, but: Quartz's David Carroll discovered that TikTok's privacy policy in late 2018 indicated that user data could be shared "with any member or affiliate of [its] group" in China. It later confirmed to him that "data from TikTok users who joined the service before February 2019 may have been processed in China."

The big picture: The murkiness of TikTok's structure could preview a trend as Chinese companies eye the U.S. and its troves of data. Lorenz's piece touched on an unaffiliated shadow event occurring beside VidCon: the East-West Forum, held by the Tencent-backed Qingteng Club. It "was targeted toward Chinese tech execs looking to enter the American market." As one attendee told her about the off-the-record event...

  • "It was mostly people from Chinese companies trying to learn from Americans; they wanted to know what problems we could have here so they could take those learnings back to China."
  • "Chinese execs were basically like, Tell us everything wrong with your platforms."

The bottom line: While the Big Tech behemoths of the U.S. are barred from making inroads in China, the inverse doesn't apply. That could mark an opening front in the ongoing technological and economic war between the two rivals.

Go deeper: TikTok is rising in the U.S.

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