China: TikTok ban 'absolutely' still on the table

A TikTok ban is "absolutely" still on the table, according to Wiley Rein LLP Partner Nazak Nikakhtar. Nikakhtar explains to Yahoo Finance Live why the U.S. government is getting increasingly "hawkish" when it comes to regulating the popular social media app.

Video Transcript

[AUDIO LOGO]

- Secretary of State Antony Blinken making his first trip to China. Blinken's visit comes as tensions between the two countries is running high. And while the US looks to de-risk its relationship with China, the hopes of a breakthrough remain up in the air. Here with more on this, we have Wylie O'Brien partner Nazak Nikakhtar.

And Nazak, it's good to talk to you today. Look, the White House has set the bar very low for this meeting. Essentially, saying that this is about just restoring the communication lines, opening those back up. What would you consider a success out of this visit?

NAZAK NIKAKHTAR: I mean, I think the first threshold question is, are we going to be successful? Is this meeting going to actually ease tensions or prompt some type of reconciliation? And the answer is, no. And this is not about Secretary Blinken. No one can be successful because the Chinese government views the United States as an adversary, as an enemy, and it's not interested in improving your thawing relations with the United States.

- Nazak, but what about-- I mean, in some ways, it seems interesting. At least in improving business economic relations. When you think about the executives that China has been courting, what are your thoughts on that?

NAZAK NIKAKHTAR: I've been working on the China issue-- the China economic competition, economic war issue for 20 plus years. With China, it's a one way street. They caught companies in and they extract what they need to. And then when it's convenient for them, they shut them out.

So of course, we're not surprised that we're seeing hoarding of US companies but that's because those companies have something to offer that's in the Chinese government's best interest. And when they're done with them, they'll get rid of them as we've seen.

- So if we take Bill Gates' recent visit with President Xi himself, what's the motive here? If you talk about trying to extract something, why meet with Bill Gates?

NAZAK NIKAKHTAR: Look, Bill Gates has business ventures that are very important to the Chinese government. And so what they do-- they want to signal, especially to the major corporate leaders of America, that look, China is open for business. Come on in. We're happy to do business with you.

And what better person to start with than Bill Gates? They've been courting Elon Musk. We just saw a recent trip. It's a signaling tactic. But at the end of the day, they will bring companies in. And we see the forced joint ventures, the transfer of IP, we've seen the story over and over again.

And I have yet to see any company that says, work going in China is going to be a success story in the short, medium, and long term. Every single company acknowledges that in the long term the prospects in China, of success in China are very weak.

- Speaking of companies that have kind of been under scrutiny and the spotlight. Let's talk about TikTok. I mean, there's been talk of a ban on TikTok. It seemed to take a back seat to these AI conversations within the government and them looking how to manage or regulate that. Is TikTok now-- is the potential for an all out ban still on the table from your point of view?

NAZAK NIKAKHTAR: Absolutely, states are progressing what the bans. We just recently saw just on June 2nd, a ban on federal government contractors using TikTok into devices that intersect with the work that they do for the government. So the government is getting more and more hawkish. Congress is preparing to move forward on more aggressive legislation, pushing forward the legislation. that they have. So this is not dying yet.

And we see states are now in litigation with TikTok with respect to the proposed ban. And so the TikTok issue isn't going to die out. Well, I just expect us to see more and more movement in the months ahead.

- And Nazak, I want to get back to the earlier point you made about Bill Gates and that meeting with President Xi. I mean, certainly, President Xi has been looking to court some of those leaders, business leaders. You mentioned Elon Musk is one. But, I mean, couldn't you argue that China is in a bit more of a vulnerable position right now when you consider the economic recovery simply hasn't picked up the way they expected or they wanted to post pandemic.?

NAZAK NIKAKHTAR: Yeah, I think that we have to be careful about looking at today as an isolated incident versus China sort of cutting businesses over years and decades, right? China's strategy of supporting us businesses, global businesses over the years and decade has been to extract IP, to extract know how et cetera.

And so, we see it now but we have to understand and we have to remember that we can't take this as an isolated incident, right? Yes, it aligns with the time that China is trying to recover post COVID-- post the zero COVID policy.

But when we look at this in the broader context of the continuum of hoarding, there's one reason for the reporting. The Chinese government has been explicit about this. To lure businesses in their territory so they can get the know how, get the IP, build their own economies, and then, again, once they're done, the Chinese government isn't shy about then exempting companies from being able to grow within the Chinese market.

- And on that front, we heard from the Commerce Department this week blacklists 30 additional Chinese companies for selling US IP to the Chinese military. Let's talk about where the Biden administration's policy is right now. Because on the one hand, we're hearing we want to keep the lines of communication open.

At the same time, we've heard from the likes of Jake Sullivan, the National Security advisor say, we are trying to de-risk here. Not necessarily decouple but de-risk, bringing manufacturing back on shore, protecting our IP and technology. How do they navigate that very delicate line in this meeting?

NAZAK NIKAKHTAR: I think I think the only way to do it is to have these dueling inconsistent narratives, right? We're very, very concerned about China's control over supply chains, China's control over choke hold supply chains so we have to reshore. We're also working to make sure that all of the technology we've already given up to China, they're not able to run faster and capitalize on even more technology growth.

So we're restricting exports of high technology transfer goods to China. At the same time, we're saying, look, we're doing this to protect our own self interest. In much the same way, I want to emphasize that China is taking measures to restrict access into their markets to restrict investments into their markets, to restrict our technology, our companies from being able to access their consumer base. They're doing the same thing.

So yes, we're saying that there's certain areas where we want to trade and we want to continue business relations but for interests that are vital to our economies vital to our militaries, look, we need to be independent just like you've built your own independence China.

- OK, well, we'll all be seeing what comes of this meeting Nazak Nikakhtar, Wylie partner-- Wylie Rein partner. Good to talk to you today. I appreciate the time.