After initially opposing the sale of TikTok to avoid the platform’s ban in the United States, the Beijing government seems to have finally found an owner that suits them: Elon Musk. And it’s not just the Chinese who would stand to gain.
Chinese officials are discussing a possible option involving selling at least a part of the American version of the TikTok app to X, the network owned by Elon Musk, as reported by Bloomberg and Wall Street Journal.
The discussions would mark a radical reversal of China's position on the sale of TikTok just days before a law could come into effect that might ban the app in the United States. To avoid a ban, the law would allow TikTok's parent company, ByteDance, to sell to an American owner.
There are several logical reasons why Musk, ByteDance, and China might consider it in their interest to facilitate the sale of TikTok assets to the owner X, as reported by CNN.
A win for all parties
ByteDance may simply want to gain something for the American version of TikTok before losing access to the valuable American market.
For China, selling to Musk would mean placing TikTok in the hands of an ally, someone whose business empire relies heavily on the Chinese market and who has full access to the future President Trump, at a time when China will be seeking any leverage in tariff negotiations.
And for Musk, acquiring TikTok and maintaining Americans' access to the app at the last minute after TikTok fought against the ban invoking the First Amendment would fit perfectly with the billionaire's (often hypocritical) self-image as a defender of freedom of expression. He would thus gain control over a larger and more influential social platform than X, which he has already successfully used to advance his own interests, including contributing to the re-election of Donald Trump.
"My bet is that it's an attempt by Musk or the Chinese to see the reaction. The Chinese probably realize where they would fit in a larger deal with Trump, but I don't see them giving it (the TikTok network - ed.) away for nothing," said James Andrew Lewis, director of the Strategic Technologies Program at the Center for Strategic and International Studies.
Such a deal would face several obstacles.
ByteDance would need approval from the Chinese government to sell TikTok operations in the US due to export restrictions, which prohibit the sale of sensitive technologies, such as the app's recommendation algorithm, without a license.
And if ByteDance's legal challenge to the US Supreme Court fails, Musk may be the most suitable American buyer, given the significant business volume he conducts in the country.
China is Tesla's second-largest market for automobiles: in the third quarter of 2024 alone, Tesla earned $5.7 billion from China. The Shanghai Gigafactory is among the company's most productive units. Tesla is also in the process of building a massive battery factory in Shanghai.
Musk has had several meetings with Chinese officials in recent years, including a discussion with Chinese Premier Li Qiang in Beijing last April, during which the official praised Tesla as a "successful model" for US-China cooperation.
China may also want to use Musk to reach Trump.
A TikTok agreement could serve as leverage in negotiations with the incoming administration to avoid the massive tariffs that the elected president has threatened to impose on goods imported from the Asian country, which could lead major companies to produce fewer goods there.
After making significant donations to Trump's reelection campaign, Musk has become one of his closest advisors and has participated in conversations between the future American president and other world leaders.
Moreover, if Trump gives his blessing, the future president could use the deal to claim that he has kept his promise to keep TikTok for Americans.
For Musk and X, acquiring TikTok could be a coup. The 170 million monthly American TikTok users would be a strong boost for Musk's social media company, providing valuable data for Musk's artificial intelligence company, xAI.
Musk could hit it big with TikTok, but where's the money coming from?
The big question, of course, is whether Elon Musk could afford to buy TikTok. Although Musk is among the richest people in the world, a large part of his wealth is tied to Tesla's shares and his other companies.
And after acquiring X, formerly Twitter, over two years ago, Musk might find it harder to find financing partners for a TikTok bid, although the short video app would almost certainly be a more profitable business than X.
The $44 billion acquisition of Twitter was overpriced, and the billionaire's subsequent decisions after the acquisition further reduced the platform's value.
It seems that this has put the banks that lent him money to buy Twitter in a position where they cannot repay their debt without losing money, leaving them with large holes in their balance sheets, as reported by CNN.
Additionally, there are some limits on how Musk can use the $170 billion in Tesla shares he holds as collateral for loans.
Still, it wouldn't be entirely impossible for Musk to "sweet-talk" the bankers into giving him a more than generous loan. Banks may be interested in working with Trump's "best friend," and it's expected that his other companies will also benefit from his relationship with the White House. Moreover, Musk's net worth has skyrocketed since the elections.
T.D.