This is a big week for Chinese-owned short video app TikTok. Chief executive Shou Zi Chew will testify before the US Congress on Thursday. The list of US lawmakers who back a ban of the popular app for national security reasons is growing. A ban would set a worrying precedent for other Chinese apps.
TikTok has more than 150mn active monthly US users, almost half of the population. Its popularity drives concerns that user data could be shared with the Chinese government, which TikTok has rejected.
The US market has been crucial to parent company ByteDance reaching a private valuation of about $220bn.
The limits of other Chinese tech peers are showing, especially for companies behind ecommerce and short video apps. These long ago reached saturation point domestically.
Price competition is now the main way of outdoing rivals. But every time one of these companies launches a heavily discounted shopping promotion, its shares plunge. Chinese app companies must now rely on overseas markets for growth, especially the US.
New laws are not the only risk. US tech groups may control access and downloads on their app stores. On Tuesday, Google suspended Chinese ecommerce app Pinduoduo from its Google Play app store over security concerns while investigations continue. Pinduoduo has rejected suggestions the app is a threat.
Shares of Pinduoduo owner PDD are down more than 13 per cent this week. Sales in the last quarter rose but missed expectations. General and administrative expenses more than tripled.
Rising expenses reflect aggressive overseas expansion by local groups. But they have little choice. Even Alibaba’s cloud business — once seen as its new growth engine — is thought to have reached market saturation domestically.
The fate of ecommerce peer Suning, which in 2021 needed a $1.4bn bailout backed by local government funds, is a reminder of how things could end up without global expansion. A ban on TikTok would mean more closed doors for Chinese peers.