Yesterday’s economic data releases from China were encouraging further indicators of its economic recovery. Notably, August retail sales gained 0.5% yoy, which was ahead of expectations, the first positive yoy reading since Covid-19 struck and industrial production also exceeded expectations gaining 5.6% yoy. Property investment for the January-August period grew 4.6% yoy, ahead of expectations and faster than 3.4% yoy in the January-July period. Helped by signs of economic recovery, the offshore renminbi has appreciated 1.33% (CNH spot) MTD at the time of writing.
There has also been some hope that ByteDance’s preliminary agreement with Oracle to form a “technical partnership” may address the TikTok problem and help to ease US-China tensions a little. The Trump administration has voiced concern that the TikTok app potentially was giving the Chinese government access to sensitive data culminating in an ultimatum for the business to be sold as it presented a security risk. TikTok has stated that it believes the proposal that has been submitted to the Treasury Department “would resolve the Administration’s security concerns.” The White House had given a September 20th deadline for a plan for sale. TikTok rejected an alternative bid from Microsoft’s for its US operations.
Media reports suggest that the bid has already been reviewed by the Committee on Foreign Investment in the US and Trump said on Tuesday he would decide on the deal “pretty soon”. President Trump has the final say with the power to clear or block the deal and as it appears not to be an outright sale it is unclear whether the proposal goes far enough to appease Trump. Sen Josh Hawley (R.,Mo) argues the deal does not go far enough stating “an ongoing “partnership” that allows for anything other than the full emancipation of the TikTok software from potential Chinese Communist Party control is completely unacceptable, and flatly inconsistent with the President’s Executive Order of August 6.”
Media reports suggest Oracle is likely to end up with a minority stake in TikTok Global, a company headquartered in the US, with ByteDance remaining a shareholder: media reports suggest that ByteDance will remain a majority shareholder. But we stress full details of the deal and final terms are yet to be released/confirmed. As a technology partner Oracle’s would likely store data on American users addressing the initial concerns that Americans’ data could potentially be accessed by Beijing. However, a deal is also likely to need to address TikTok’s recommendation algorithm technology and concerns about Beijing’s ability to influence content set against ByteDance’s apparent reluctance to sell this and Beijing prohibiting the sale of these technologies without government permission. The terms of the deal will also have to satisfy Beijing.