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Decoupling with China and what a Biden presidency could mean for TikTok

Roger Zakheim, Ronald Reagan Institute Director, joins Yahoo Finance to discuss the Microsoft-Walmart bid for TikTok and what a Biden win in the 2020 presidential election would mean for China-U.S. corporate relations.

Video Transcript

JULIE HYMAN: All right, let's turn to another issue that we've been watching closely. It has to do with TikTok. Of course, the Chinese-owned social media company, the sale of which the administration has been pushing for. And there have been many and sundry different bidders who have been talked about for this company, including a Microsoft-Walmart team up, as well as Oracle. It's unclear who's going to win it, but we could get news on that at any time.

I want to bring in Roger Zakheim. He is Ronald Reagan Institute director. He's joining us from Washington. Roger, as we watch this, it's striking to me still, especially as we talk about the convention going on, what the situation is with the government involvement in this deal. How are you thinking about that? And how are you assessing that?

ROGER ZAKHEIM: Well, I mean, the government involvement in this deal is not surprising. Concern about Chinese ownership of companies that do business in the United States that have access to huge amounts of data is really nothing new. What's new is that this particular company is one that has an app that all our children, or many of our children, are using on a daily basis. So the government involvement is not surprising.

What is interesting is how the US government will look to resolve this issue. And really, what's this going to teach us about a larger policy objective of the Trump administration, which is in areas relevant to national security, how are we going to decouple from China? How are we going to realize this separation? How will that actually work, particularly in the world of technology?

DAN ROBERTS: Roger, Dan Roberts here. Julie asked about sort of the government involvement in pushing this deal and saying it has to happen. I would also ask what the latest is and your thoughts on Trump's previous claim that he would like the US government receive some kind of cut. I haven't heard him peel that back, although I haven't heard him repeat it again.

And then a second part of this as we look forward, since you said this shows how the Trump administration feels about these companies from China, what happens if the Trump presidency ends and if it's a President Biden? Do we imagine the same kind of attitudes toward these Chinese tech companies? Or is there going to be a reversal on that or a pumping of the brakes?

ROGER ZAKHEIM: Yeah, to your first question, I mean, it's not unusual, as the US government mandates separation in the form of limiting foreign ownership control influence for there to be some payment involved to realize that transition. It's unclear whether President Trump was talking about that or something more significant. And I know there are skeptics out there thinking that he might have been talking about billions of dollars. And that would certainly be unusual and unprecedented.

I do think that-- to the other question about what happens in a Biden administration, that is-- that, in many respects, is the most interesting element of China policy if this were to go Democratic. We know both candidates feel that they are in a better position, they both say that they will address the China challenge and competition threat in a better way. But Biden, particularly in terms of how this has been approached during the Obama administration, will look, probably, to mitigate foreign ownership of Chinese companies in the United States.

At the same time, they'll seek cooperation in areas where they can't. And that will inevitably lead to a changed dynamic with China, less confrontational, looking for areas of cooperation. Climate change, of course, is the number one example.

So would TikTok kind of ban in 45 days continue in a Biden administration? Very well could, from the standpoint of yes, we want US ownership there, and really encouraging some resolution in terms of US ownership of the-- what is the US subsidiary.

JARED BLIKRE: Jared Blikre here. I want to get your take on what's happening with US-China relations, and specifically the US's crackdown on Chinese offerings in the US, especially with a lot of accounting irregularities that have popped up over the years. Do you see that heading in a similarly more friendly direction in the future? Or could that ramp up hostilities again?

ROGER ZAKHEIM: Listen, what's so interesting and challenging about, let's say, the competition with China that's different than, let's say, the Cold War with the Soviet Union is our economies are so integrated, that the United States and businesses United States rely on this trade and commerce with China. But we have to figure out where this decoupling is going to play out. And this is not just Republicans saying it. It's Democrats, too.

And it does kind of interface in a lot of these technology companies and in any publicly-traded company that in terms of US markets are reliant upon a degree of transparency and kind of an approach where we follow just the rules of the game. And increasingly, going back to President Obama, even before that, we've seen that you can't rely on Chinese companies to do that. We are less confident about it. And we speak more openly about it now. You take that, combine what's happened in Hong Kong, and government-- and not just government, but businesses as well are going to be a lot more reticent to go deep into the China integration for their businesses.

JULIE HYMAN: Roger Zakheim, thank you so much. Director of the Ronald Reagan institute, appreciate it.