Beijing trades TikTok for lifting investment barriers from Washington

It's in the readout and Q&A, but we just don't know exactly what it is - for now.

This is purely based on my reading of publicly available information from the just concluded Madrid talks, and it differs significantly from international mainstream media reports you’ve read so far.

Let’s look at the Chinese-language readout from the Chinese side. All emphasis is mine.

(1) On September 14–15 local time, He Lifeng, Vice Premier of the State Council and China’s lead representative for economic and trade affairs, held talks in Madrid, Spain, with U.S. counterparts Scott Bessent, Secretary of the Treasury, and Jamieson Greer, United States Trade Representative. Guided by the important consensus reached during the recent phone call between the two heads of state, the two sides engaged in candid, in-depth, and constructive discussions on economic and trade issues of mutual concern. They reached

就以合作方式妥善解决TikTok相关问题、减少投资障碍、促进有关经贸合作等达成了基本框架共识

a basic framework consensus encompassing cooperative approaches to appropriately addressing issues related to TikTok, reducing investment barriers, and advancing relevant economic and trade cooperation

The two sides will consult on the outcome documents and proceed with their respective domestic approval procedures.

(2) He Lifeng stated that China’s determination to safeguard its legitimate rights and interests is unwavering, and that it will resolutely protect the national interest and the lawful rights and interests of Chinese enterprises operating overseas. With regard to the TikTok issue, China will conduct technology export reviews in accordance with the law and regulations. At the same time, the Chinese government fully respects the will of its overseas enterprises and supports companies in conducting equal business negotiations with partners on the basis of market principles.

(3) He Lifeng emphasized that the essence of China–U.S. economic and trade relations is mutual benefit and win-win outcomes, and that the two countries share broad space for cooperation and extensive common interests. Cooperation benefits both sides, while confrontation harms both. He expressed the hope that the U.S. side will move in the same direction as China, lift relevant restrictive measures against China as soon as possible, and take concrete actions to jointly safeguard the hard-won achievements of the talks, thereby creating a favorable atmosphere for the stable and sustained growth of China–U.S. economic and trade relations.

(4) Both sides agreed that stable China–U.S. economic and trade relations are of great significance to both countries and have an important impact on the stability and development of the global economy. They will continue to implement the important consensus of the two heads of state and the outcomes of previous economic and trade talks, give full play to the role of the China–U.S. economic and trade consultation mechanism, continuously build consensus, resolve differences, strengthen cooperation, strive for more win-win results, and promote the sound, stable, and sustainable development of China–U.S. economic and trade relations, thereby injecting greater stability into the world economy.

Based on the Chinese readout, the consensus is a basic framework encompassing three things, as I highlighted

1. cooperative approaches to appropriately addressing issues related to TikTok

2. reducing investment barriers

3. advancing relevant economic and trade cooperation

Let’s say TikTok deal is a Chinese concession to the U.S. Then for what? At the very least: reducing investment barriers.

What exactly? It’s in this paragraph, as I highlighted

He Lifeng emphasized that the essence of China–U.S. economic and trade relations is mutual benefit and win-win outcomes, and that the two countries share broad space for cooperation and extensive common interests. Cooperation benefits both sides, while confrontation harms both. He expressed the hope that the U.S. side will move in the same direction as China, lift relevant restrictive measures against China as soon as possible, and take concrete actions to jointly safeguard the hard-won achievements of the talks, thereby creating a favorable atmosphere for the stable and sustained growth of China–U.S. economic and trade relations.

So far, it’s unclear what “relevant restrictive measures against China” He Lifeng demanded Scott Bessent and Jamieson Greer to lift, but we know it’s “investment barriers” according to Li Chenggang.

Given that the U.S. has imposed two-way investment barriers, it could be enabling U.S. investment into China, or Chinese investment into the U.S. But there is something.

Just a bit more details come from the answer Li Chengang, China International Trade Representative (full minister rank) and China’s second-ranking official in the trade talks, gave to a Reuters reporter at the Chinese delegation’s press briefing, from 19:46 in the following YouTube video recording

Q: I’d like to ask about the TikTok framework consensus that was reached today. Why did you agree to it? What did the U.S. offer specifically in exchange? And also do you expect any other consensus in other areas maybe in a Friday phone call?

A: ……美方也表达了，愿意在减少投资障碍，进一步促进相关经贸合作方面，与中方相向而行。我想，只要双方始终遵循，相互尊重，平等协商，我们将会在越来越多的经贸领域，取得更多的成果。让咱们拭目以待。

…… The U.S. side has also expressed its willingness to move together with China toward the same goal when it comes reducing barriers in investment and promoting relevant cooperation on trade and economic front. I believe that as long as the two sides follow this principle of mutual respect and equal consultation, the two sides will see more and more outcomes in more and more trade and economic areas. And let us wait and see.

So it’s quite clear, from both Beijing’s official readout in text, as well as Li Chenggang’s Q&A, lift relevant restrictive measures against China/reducing investment barriers, is in play here.

The readout frames He Lifeng as “expressed the hope that the U.S. side will,” whereas Li Chenggang said “The U.S. side has also expressed its willingness to.” In my reading, they are talking about the same thing.

So, what specific relevant restrictive measures against China/investment barriers are there to potentially lift?

The U.S. has imposed two-way restrictions. When it comes to Chinese investment to the United States, it’s mainly CFIUS, plus Foreign Investment Risk Review Act of 2018 (FIRRMA) which extended CFIUS. When it comes to U.S. investment to China, it’s mainly Reverse CFIUS and NS-CMIC（Non-SDN Chinese Military-Industrial Complex Companies List）.

There is no public info on this, but again my reading is that the U.S. made promises to China on lifting relevant restrictive measures against China/investment barriers in exchange for the TikTok deal.

Otherwise, why would China just concede on TikTok?

Well, according to the Wall Street Journal report following the Madrid talk

(emphasis is mine)

U.S. Reaches Outline of Deal With China Over TikTok

China’s concession was likely made to keep alive Beijing’s ambition for a Trump-Xi summit

MADRID—U.S. and Chinese negotiators reached a framework deal on TikTok after two days of trade talks here, a crucial step toward ending the yearslong saga overwhether the video-sharing app can operate in America just days befofore it was set tobe banned.

Beijing had previously shown little appetite for a deal on the wildly popular app, but likely conceded to an agreement to keep alive its ambition for President Trump to visit China.

The deal will be confirmed by Trump and Chinese leader Xi Jinping following a call on Friday, Treasury Secretary Scott Bessent said.

The outline of an agreement came together as China escalated its regulatory campaign against U.S. chip juggernaut Nvidia during the negotiations.

The Chinese regulator’s action, according to people familiar with the matter, was taken to provide Xi with political cover for the TikTok deal so he wouldn’t appear weak to his domestic audience.

Until the Madrid meetings, Chinese authorities had resisted U.S. demands that TikTok’s Chinese parent company, ByteDance, sell its controlling stake to U.S.investors. The newfound flexibility is linked to Beijing’s intensifying efforts to secure a state visit from Trump.

There is an easily overlooked but crucial language inaccuracy here. The Chinese readout actually says

就以合作方式妥善解决TikTok相关问题、减少投资障碍、促进有关经贸合作等达成了基本框架共识

a basic framework consensus encompassing cooperative approaches to appropriately addressing issues related to TikTok, reducing investment barriers, and advancing relevant economic and trade cooperation

it’s a framework encompassing three things, not a framework on TikTok alone.

However, just like the WSJ, Reuters also described

a framework agreement to switch short-video app TikTok to U.S.-controlled ownership

The New York Times quoted Bessent as saying

Mr. Bessent said that the two sides had a “framework for a TikTok deal”

After two days of talks in Madrid, Treasury Secretary Scott Bessent said that the sides had agreed to a “framework” for a deal to divest TikTok from its Chinese owner, ByteDance.

And here is the Bloomber report

Treasury Secretary Scott Bessent said the threat of allowing the social media app TikTok to go dark in the US was what ultimately sealed a framework deal in Madrid that would see the American iteration of the platform enter US hands — severing connections with its Chinese parent company ByteDance.

let me repeat, according to the Chinese readout:

it’s a framework encompassing three things, not a framework on TikTok alone.

This WSJ story also says, hedging with the keyword “likely”, that Beijing traded TikTok for a potential state visit from Trump.

I find it difficult to stomach. In addition to my reasoning above based on the Chinese readout and Li’s Q&A, yes Beijing welcomes a Trump visit, but I doubt it is willing to trade TikTok - something very concrete and tangible - for simply a potential visit.

Scott Bessent actually said something quite interesting after the talk, as reported by Bloomberg

Basically what they got was the promise of things that won’t happen rather than taking things off,” he said from a suite at the Madrid hotel where the US delegation was staying.

Which actually confirmed the framework is not just on TikTok, but involving other promises.

So at the very least, the U.S. promised China something.

By the way, Reuters’ story and The New York Times story from Madrid sidestepped the question what Washington traded from Beijing in order to get TikTok. Bloomberg’s headline is Bessent Says Trump’s Threat of TikTok Shutdown Delivered Deal.

Remember back in May I was the first to call this