In late December 2025, a major breakthrough appeared to reshape the long-running TikTok saga in the United States. ByteDance signed binding agreements to spin off TikTok’s U.S. operations into a new entity, temporarily easing fears of a nationwide ban. However, statements from Beijing quickly revealed a deeper complication: the deal is not a clean divestiture, and its success hinges on an unresolved conflict between U.S. and Chinese law.
The Real “Surprise”: China’s Export Controls
At the heart of the controversy is TikTok’s recommendation algorithm the core technology that drives user engagement. China’s Ministry of Commerce (MOFCOM) has made it clear that the algorithm cannot be transferred without explicit government approval. Under China’s 2020 Export Control Regulations, “personalized information recommendation services based on data analysis” are classified as restricted technology.
This creates a regulatory trap. U.S. law, passed in 2024, requires a full and qualified divestiture, meaning ByteDance must sever control entirely. China, meanwhile, is signaling it may block the export of TikTok’s most valuable asset. Without the algorithm, a simple sale becomes legally impossible.
Inside the TikTok U.S. Deal Structure
To avoid an outright ban, ByteDance agreed to form TikTok USDS Joint Venture LLC, with the transaction expected to close on January 22, 2026. Ownership is carefully calibrated to comply with U.S. law:
- 50% held by U.S. and allied investors, including Oracle, Silver Lake, and Abu Dhabi-based MGX
- 30.1% held by ByteDance-affiliated investors
- 19.9% retained directly by ByteDance, the maximum allowed under U.S. legislation
While ByteDance’s stake is technically a minority, critics argue its influence could remain significant without a true technology transfer.
The Algorithm “Workaround”
Because China refuses to approve the sale of the algorithm, the deal relies on a technical compromise. TikTok CEO Shou Zi Chew has stated that the U.S. entity will retrain a new algorithm using American user data rather than importing ByteDance’s existing system.
Oracle will act as the trusted security partner, auditing source code, monitoring infrastructure, and ensuring all U.S. user data remains stored exclusively on Oracle’s U.S.-based cloud servers. The goal is to eliminate any potential control or manipulation from Beijing.
Political Stakes in Late 2025
President Donald Trump, back in office, has repeatedly extended the divestiture deadline to January 23, 2026. He has publicly supported keeping TikTok available and backed Oracle’s leadership role in the deal. China, however, continues to insist that the U.S. respect its technology export laws and provide a fair business environment.
What Comes Next?
The unresolved question is whether U.S. regulators and Congress will accept a “retrained” algorithm as a genuine divestiture or whether China could still veto the arrangement at the last moment. Until that decision is made, TikTok’s future in the U.S. remains uncertain.
