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If China is Forced to Sell TikTok, is Microsoft the Natural Buyer?

Decades of Cozying Up to the Regime by the Company Could Make It the Most Likely to Lead the Acquisition Pack

Apr 16, 2024


  • A history of hosting Chinese leaders and censoring Bing in China positions Microsoft to pounce on TikTok.
  • Thousands of Microsoft employees in China give the company immense soft power.
  • Few companies have the balance sheet to support a $50 billion to $220 billion takeover.

Back in 2020, when the prior administration first considered forcing TikTok to divest from its Beijing-based parent company ByteDance, several companies emerged as potential buyers. The leading candidate was Microsoft, which, as CNN reported at the time, “has spent decades building goodwill with Beijing.” As ByteDance now faces legislation that would force it to divest TikTok, will Microsoft be on again at the front of the acquisition pack?

The company was ByteDance founder Zhang Yiming’s first choice. He approached Microsoft when faced with the threat of a TikTok ban first emerged. At the time, The New York Times reported:

For ByteDance and TikTok, a deal with Microsoft could help propel the valuation of the app’s business outside China to as high as $80 billion, the people said. It would also provide TikTok with the endorsement of a blue-chip American company to mollify the Trump administration, which had called TikTok’s Chinese ties a national security threat.

In the intervening years, Microsoft established an AI partnership with ByteDance in the summer of 2022. This is despite the Biden Administration working to restrict China’s access to advanced AI tools in order to protect national security. Worse, ByteDance, as reported by The Washington Post, is complicit in the human rights abuses of Uyghur Muslims in China’s Xinjiang region—from mass surveillance of this ethnic minority to their internment in concentration and forced labor camps.

So as Congress debates legislation on TikTok aimed at addressing a national security threat posed by ByteDance and China, let’s take a closer look at some of the cozying up Microsoft has done in China over the years.

  • Microsoft does more research and development in China than anywhere outside the US, according to Business Insider. The company boasts more than 9,000 full-time employees in China and first opened up offices 32 years ago.
  • When Chinese President Xi Jinping made his first visit to the US, he first stopped in Seattle and met with technology-industry CEOs, including Microsoft’s Satya Nadella and visited Microsoft’s HQ. China's previous president, President Hu Jintao, had dinner at Gates' house in 2006.
  • Microsoft also funded a technology-industry graduate school near its Seattle-area headquarters called the Global Innovation Exchange, a partnership between Seattle’s University of Washington and Tsinghua University, often called “China’s MIT.” Microsoft President Brad Smith personally helped to broker the partnership.
  • The Financial Times reported that Microsoft’s research labs have served as talent incubators, fostering connections with top Chinese tech executives, including ByteDance founder Zhang Yiming, who approached Microsoft when faced with the threat of a TikTok ban by President Trump.
  • Microsoft has a direct stake in several companies in mainland China, including Wicresoft, which provides services to companies sanctioned for national security concerns and human rights violations. Wicresoft boasts of the close relationship, noting “Wicresoft services have penetrated into the R&D and operation of Microsoft's full line of technology and software products.”

What is clear: While Microsoft attempts to downplay its entanglement in China, the facts say otherwise. Just one month after Microsoft CEO Satya Nadella told CNBC he wasn’t focused on China, the company’s president Brad Smith was in Shanghai meeting with party officials and touting the company’s investments in China. There’s a certain irony in American business executives engaging in double speak when it comes to their business interest in an authoritarian regime.

The connection runs deep, and, while it's unclear if China would ever allow a partial or complete divestiture of TikTok, Microsoft's dealings in the country could position the company well in the event that TikTok needs to find a buyer that the U.S. government would approve. But if the goal of divestiture is to address a national security threat from China, regulators should ask themselves whether allowing Microsoft to buy TikTok really addresses that threat or simply creates a new one.