China is calling a TikTok deal a win. What's in it for them?

TikTok's Chinese owner, Bytedance, understandably refused to part with the prized formula, and Beijing backed the firm.

But in a twist few saw coming, China's top cybersecurity regulator has signalled that Beijing may allow ByteDance to license the algorithm and other intellectual property (IP) to a US company owner. But it will not be transferred outright.

It's a major departure from China's previous hardline stance over the algorithm.

But there's every chance the US version will run on a "stripped-down" version of the app's software, said computing expert Kokil Jaidka from the National University of Singapore.

Even limited access could reveal how the technology drives engagement, moderation and ad targeting - all the things that make the app so profitable, she adds.

"It simply doesn't make business sense for ByteDance to hand over its most valuable asset when a lighter version can keep the app running without giving away its edge."

But these changes will affect the user experience - the app may show less diverse content than users might see elsewhere, Dr Jaidka adds.

"A lighter, slower, more domestic version - while ByteDance keeps the crown jewels in Beijing."

Deals of this size typically take months or even years to complete, and there are a number of issues to resolve.

For one, it is not clear how US-owned and operated TikTok would interact with TikTok elsewhere, which would be still be owned by ByteDance.

And two, ByteDance, being a private company, would need approval from its board for the arrangement to proceed.

That adds a layer of complication even if the Chinese government - which enforces export controls on advanced technologies like algorithms - has already approved the deal.

And the US president himself, who has proven to be an unpredictable trade partner, could create fresh complications.

We know Trump is keen on a TikTok deal, and we know why.

It would be a big win for his administration. One in seven people in the world use the app, which also doubles up as a huge marketplace for buyers and sellers across the world, from the US to Germany, Indonesia to the Philippines.

"This is the only social media app that didn't originate in the US and so it's very valuable," the former social media executive said.

The average revenue per user for most social media apps in the US is five to 10 times higher than other countries, with America likely making up something close to 50% of ByteDance's overall revenue, he added.

Tech news site The Information estimated ByteDance's global revenue to be $39bn (£28.6bn) in 2024, with TikTok accounting for $30bn.

What we don't know yet is how China would gain from such a deal.

The licensing deal will allow ByteDance to keep its algorithm under wraps - a strategic advantage if the US ever intends to launch new apps to compete with those already operating in the country, said computer scientist Ben Leong.

And rather than be banned, TikTok gets to stay in the US market. TikTok's parent would also retain the single biggest stake in the app, along with the logo, format and branding.

The deal also creates a "TikTok Template" for other Chinese companies to deploy their technology in the US through licensing, investor and tech expert Kevin Xu wrote in his recent newsletter.

He added that ready-to-go Chinese technologies that matter to national competitiveness, like batteries and rare earths, could now flow to the US more easily.

"This is the formula that will likely be applied should, say, BYD want to make a jump into the US market, or CATL want to step up its expansion to supply more US carmakers with its batteries."

China can spin the deal as a win - it is exporting Chinese-made tech on its own terms. And that might be critical leverage for Beijing in trade negotiations with Washington.

"The Chinese side have called the talks in depth, constructive and candid. That signals that they are actually quite happy with how things are going," said former World Bank Country Director for China Bert Hofman. "Question is when will there be a full deal?"

A TikTok deal could buy them time for exactly that. The US is a huge export market for China, and China is a major buyer of American agricultural goods. High tariffs would hurt both. There are also export controls on both sides, especially restricting US access to rare earths, which China has a near monopoly over.

Ultimately, it seems a breakthrough on TikTok is progress for China. The US may get a deal, but perhaps not the coup Trump had in mind.

"The deal might work on paper - but in practice, it will always sit under a cloud," Dr Jaidka said.

"A US TikTok will look like the same app, but behind the scenes it will run on borrowed code, firewalled data, and political trust that could vanish overnight."