(Hey NEWS) -- Chinese officials are considering an alternative proposal where Elon Musk acquires TikTok's US operations if the company can't overcome a contentious ban on the short-video platform, according to individuals with knowledge of the matter.
To enforce the law. Senior Chinese government officials had started discussing potential backup plans for TikTok as part of a thorough discussion on how to cooperate with Donald Trump's administration, one of which involves working with Musk, said the individuals with knowledge of the confidential discussions requested anonymity.
A potential high-profile deal with one of Trump's closest allies has some potential benefits for the Chinese government, which likely has some say-so in whether or not TikTok is sold, according to sources. Elon Musk invested over $250 million in Trump's re-election campaign and has been offered a high-profile role in improving government efficiency after he takes office.
According to sources, under one potential scenario proposed by the Chinese government, Elon Musk's X platform would partner with TikTok to assume control of the US operations, potentially merging their businesses. With over 170 million users in the US, this collaboration could help X attract more advertisers. Additionally, Musk has established another artificial intelligence company, xAI, which could utilize the vast data generated from TikTok, potentially to its advantage.
Chinese officials have yet to agree on a plan of action and their talks are still in the early stages, according to sources. It's unclear whether ByteDance has information about the Chinese government's discussions, or if Twitter (TikTok) or Musk have been involved. It's also unclear if Musk, Twitter, and ByteDance have discussed the terms of any potential deal.
He believes that TikTok shouldn't be banned in the US, despite such a ban potentially helping the X platform. "In my opinion, TikTok should not be banned in the USA, even though such a ban may benefit the X platform," he wrote on X. "Doing so would be contrary to freedom of speech and expression. It is not what America stands for."
Representatives for ByteDance and TikTok didn't return messages seeking a comment. The Cyberspace Administration of China and China's Ministry of Commerce, government agencies that may be involved in decisions about TikTok's future, also didn't respond to requests for comment.
Warning: Time is Running Out on TikTok in the US
Conversations in Beijing suggest that the fate of TikTok may no longer be solely in ByteDance's hands, according to individuals with knowledge of the matter. Chinese officials acknowledge they will face challenging negotiations with the US administration regarding tariffs, export controls, and other issues, and they believe that TikTok negotiations could potentially be a way for the two sides to come to a mutually beneficial agreement.
The Chinese government has a controlling interest, often referred to as a "golden share," in a ByteDance affiliate, which gives it significant influence over the company's business decisions and operations. However, TikTok claims that the control only applies to its China-based operations, Douyin Information Service Co., and has no impact on its global operations. Nevertheless, China's export regulations prohibit Chinese companies, including ByteDance, from selling their software algorithms, such as the one that drives TikTok's recommendations. As a result, any potential sale involving TikTok would require approval from the Chinese government, effectively giving it a significant say in the deal.
Hey NEWStelligence analysts Mandeep Singh and Damian Reimertz estimated last year, and that's a substantial amount for the world's richest person. It's unclear how Musk would make such a huge deal happen and whether he'd need to sell other assets or if the US government would give its approval. He spent $44 billion on Twitter in 2022 and still owes a significant amount on loans.
Musk has a positive reputation among many ByteDance employees in China, according to someone who is familiar with the situation. He is viewed as a highly successful businessman who has experience navigating interactions with the Chinese government through his involvement with Tesla Inc., the person noted.
ByteDance's top officials have repeatedly stated that their main focus is to challenge the US laws that mandate the company either sell or close its US operations due to national security concerns. TikTok's lawyers have claimed that this legislation infringes on free speech protections as outlined in the First Amendment of the US Constitution.
Most members of the Supreme Court think safety concerns take priority over freedom of expression, but they haven't officially made a decision yet. President-elect Trump, who will take office on January 20, has asked to delay the TikTok ban until January 19 so he can work out a deal. He has said he wants to "save" the app and some people expect him to take last-minute action in order to avoid the ban.
On a practical level, spinning off TikTok's US business would be extremely complicated, impacting shareholders in both China and the US. Lawyers for TikTok argued before the Supreme Court that separating the US parts of the product would be "extraordinarily difficult."
In past talks with Donald Trump, Microsoft Corp had attempted an acquisition, and Oracle Corp has a significant technology partnership with the company.
An alternative to banning TikTok could be to migrate TikTok's existing US users to a new app with different branding, one source suggested. However, it's uncertain how effective this approach would be.
An individual with close ties to the company, who wished to remain anonymous due to the sensitive nature of the strategy, stated prior to the Supreme Court hearing that the ongoing legal struggle remains a top priority for top executives and that they would prefer to continue fighting the case in the US rather than surrendering control of TikTok US through a sale.
Musk holds significant influence in the China-US relationship due to his position as the world's richest person with extensive business interests in both leading economies. As CEO of Tesla, he oversaw the establishment of a large manufacturing facility in Shanghai in 2019, which has grown into the company's main production hub. This effort allowed Tesla to increase its market share in China, despite stiff local competition, while also fostering strong relationships with local government officials.
While Trump is staffing his incoming administration with China experts like Secretary of State nominee Marco Rubio, Musk has expressed concerns over recent China trade policies, including President Biden's tariffs on Chinese electric vehicles.
With assistance from Zheping Huang, Alexandra S. Levine and Kurt Wagner.
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