Why China Might Approve of TikTok Being Sold to Elon Musk

The Chinese government, once firmly opposed to the idea of selling TikTok to prevent a potential ban in the United States, might now be warming up to the notion—provided the buyer is Elon Musk.

According to reports from Bloomberg and the Wall Street Journal, Chinese officials are considering a proposal to sell at least part of TikTok’s U.S. operations to Musk’s company, X. While CNN has not independently verified these discussions, they signal a significant shift in China’s stance on a potential sale, just as a U.S. law banning TikTok is about to take effect. Under the law, TikTok’s parent company, ByteDance, could avoid a ban by selling the U.S. division of the app to a domestic buyer.

This reversal comes as the U.S. Supreme Court recently indicated it would uphold the law, citing national security concerns, despite TikTok’s claims that the legislation represents an unconstitutional restriction on free speech. China’s commerce ministry had previously stated its strong opposition to any forced sale of TikTok, even as other potential buyers expressed interest. ByteDance itself has repeatedly asserted that TikTok is not for sale.

Neither ByteDance nor Musk responded to requests for comment on these reports. TikTok spokesperson Michael Hughes dismissed the claims as baseless, saying, “We can’t be expected to comment on pure fiction.” Still, there are reasons why all parties involved—Musk, ByteDance, and China—might find such a deal appealing.

For ByteDance, selling TikTok’s U.S. operations could provide financial compensation for losing access to the lucrative American market. For China, transferring ownership to Musk could place TikTok in the hands of someone with a vested interest in maintaining strong ties to China, given his business reliance on the Chinese market. Musk’s existing rapport with incoming President Trump could also provide China with leverage in ongoing tariff negotiations.

From Musk’s perspective, acquiring TikTok would align with his self-styled image as a champion of free speech. Saving TikTok after its fight against a U.S. ban on First Amendment grounds would enhance this narrative. Moreover, owning TikTok would allow Musk to control an even larger and more influential social media platform than X, potentially boosting his personal and business interests. Musk already has a team at X with experience managing algorithms and ad sales, providing a foundation for operating TikTok.

The timing of these rumors could be strategic, serving as a trial balloon to gauge public and political reaction. James Andrew Lewis, director of the Strategic Technologies Program at the Center for Strategic and International Studies, speculated that this might be a calculated move by either Musk or Chinese officials. “The Chinese are likely assessing how this could fit into a broader deal with Trump, but they wouldn’t give it away for free,” he told CNN via email.

However, the potential sale is not without challenges. One major hurdle would be Musk’s ability to secure the estimated $40 billion to $50 billion needed to acquire TikTok, according to Wedbush analyst Dan Ives.

A friend to China

ByteDance may require approval from the Chinese government to sell TikTok’s U.S. operations due to export restrictions. These regulations could block the sale of sensitive technologies, such as TikTok’s recommendation algorithm, without a proper license.

Should ByteDance’s legal challenge at the Supreme Court fail, Elon Musk might emerge as the most China-friendly American buyer. Musk’s extensive business dealings in China bolster this perception. In the third quarter of 2024 alone, Tesla generated $5.7 billion in revenue from China, its second-largest market. The Shanghai Gigafactory, often lauded by Musk for producing Tesla’s highest-quality cars, ranks among the company’s most efficient plants. Tesla is also constructing a large-scale battery factory in Shanghai.

Musk’s rapport with Chinese officials is well-documented. In April 2024, he met Chinese Premier Li Qiang in Beijing, where Li praised Tesla as a “successful model” for U.S.-China collaboration. Musk expressed a commitment to deepening cooperation with China, aiming for “more win-win results.”

Despite championing free speech in the U.S., Musk has largely avoided addressing such issues in China, where the government has intensified political crackdowns under Xi Jinping. Musk has even referred to Taiwan as an “integral part of China,” sparking criticism from Taiwanese leaders.

Analysts note Musk’s strong connections in China. Dan Ives of Wedbush Securities stated, “One of the biggest investors in China from an infrastructure standpoint is Tesla, so Musk’s relationship within Beijing, outside of Tim Cook from Apple, is probably the strongest of any U.S. businessperson.” However, Ives also pointed out that China is unlikely to permit the sale of TikTok’s algorithm, which he described as the app’s “key DNA.”

China may view a potential deal involving Musk as a strategic opportunity. The Chinese government could leverage such negotiations to influence the incoming U.S. administration, especially regarding proposed tariffs that could disrupt manufacturing operations in the country. Musk, a significant donor to Donald Trump’s reelection campaign and reportedly one of Trump’s closest advisers, could play a key role in brokering agreements.

For Trump, endorsing a TikTok deal might allow him to claim credit for saving the app for American users. The law governing TikTok’s sale or ban grants the president the authority to decide whether a divestiture qualifies as sufficient to permit the app’s continued U.S. operations.

Musk’s extensive financial resources, strong business ties in China through Tesla, and experience in the social media sector via X position him as a potential facilitator of a deal acceptable to multiple stakeholders, according to Dimitar Gueorguiev, a political science professor at Syracuse University.

If Musk acquires TikTok, it could be a transformative opportunity for his ventures. Wedbush’s Ives described it as a “golden asset pick-up.” TikTok’s 170 million monthly American users would significantly expand X’s reach, and the app’s video content could provide valuable training data for Musk’s artificial intelligence company, xAI.

Not a surefire deal

A significant question looming over discussions of Elon Musk potentially purchasing TikTok is how he could afford it.

Although Musk is one of the wealthiest individuals globally, most of his net worth is tied up in Tesla shares and other company holdings. Following his money-losing $44 billion acquisition of X (formerly Twitter) over two years ago, Musk may face greater difficulty securing financing for a TikTok bid. While TikTok likely boasts a stronger advertising business than X, the fallout from Musk’s previous acquisition has left a sour taste among financial partners.

The Twitter acquisition was widely considered overpriced, and Musk’s subsequent management decisions caused the platform's value to plummet further. Reports suggest that banks involved in financing the Twitter purchase still hold debt they cannot offload without taking losses, which has negatively impacted their balance sheets.

Additionally, while Musk’s $170 billion in Tesla shares could serve as collateral for loans, limitations exist on how much he can leverage. Nevertheless, some financial institutions might still find Musk’s connections and influence appealing, especially given the projected benefits for his other companies. Musk’s net worth has also surged in recent years, particularly following the 2020 election.

Even if Musk managed to acquire TikTok, retaining its user base would be far from guaranteed. His changes to X alienated many users, with frustration over algorithm modifications, the disbanding of trust and safety teams, and the reinstatement of banned accounts linked to hate speech and misinformation. Musk’s promotion of controversial and racist conspiracy theories has only amplified these concerns.

Reactions from TikTok users to reports of Musk’s interest in the platform have been mixed, with some expressing outright dismay. One user, Omie, remarked in a video: “The idea of TikTok going away is scary. But you know what’s scarier? Elon Musk owning it. I’d rather this app be banned than that mothertrucker own it.” Another user, Mo, voiced similar concerns, saying, “I love TikTok, bro, but why does it have to be Elon Musk? He’s already running Twitter into the ground.” Commenters echoed these sentiments, with one noting, “I’d rather China have my info than Elon.”

TikTok creator Dash Dobrofsky summed up the anxiety in a video captioned “Oh dear god, please no,” stating, “Musk buying TikTok sounds like a terrible idea… This would no doubt make Elon Musk the most powerful man in the world.”

A potential backlash from users could significantly diminish TikTok’s value, potentially making it a less attractive investment for Musk and any partners he might enlist.