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Politics of TikTok deal ‘pollutes’ intent of data security, expert says

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The download page for ByteDance Ltd.’s TikTok app is arranged for a photograph on a smartphone in Sydney, New South Wales, Australia, on Monday, Sept. 14, 2020.

Brent Lewin | Bloomberg | Getty Images

SINGAPORE — The politics surrounding the future of TikTok’s operations in the United States could undermine the need for better understanding and assurances when it comes to protecting user data, a security expert said Thursday. 

Beijing-based ByteDance, which owns the popular short video sharing app, rejected Microsoft’s bid to buy TikTok’s U.S. operations and instead chose Oracle to become TikTok’s U.S. technology partner. Sources previously told CNBC that Oracle became ByteDance’s partner of choice due to the company’s close ties to the Trump administration and its willingness to accept a deal where it didn’t buy 100% of the assets. 

Political leanings of various parties involved in the potential transaction “further pollutes” concerns around data privacy and security, Marcus Fowler, director of strategic threat at cybersecurity firm Darktrace, said on CNBC’s “Squawk Box Asia.” Fowler previously worked for the CIA developing global cyber operations and technical strategies. 

“I do worry that any political leanings here could pollute the outcome of what we really want which is better understanding and better assurances with regards to data and security,” Fowler said. 

He explained that there needs to be more concrete, transparent policy for how companies should be handling user data, no matter where they sit or what country they are aligned with. 

It remains unclear if the U.S. government will approve a restructuring plan that would still keep TikTok’s U.S. business, including the data collected by the app on American users, under ByteDance’s control. 

President Donald Trump told reporters on Wednesday he was not ready to approve a proposal from ByteDance and said it must be “100% as far as national security is concerned.”  

“Is it if this goes through, well, the rest (of) other countries, other organizations (be) kind of like ‘Oh, this is all I need to do to get my company’s security practices over the bar, is I just need to align from a political standpoint rather than from a baseline of this is what security and security assurance looks like and this is the level of security I need to have in place in order to reach a bar that is acceptable’,” Fowler said. 

The United States has alleged that data collected by the app on American users could be accessed by the Chinese government and may be used for disinformation campaigns. TikTok has denied those allegations and said U.S. user data is stored in the country itself with a backup kept in Singapore.

The White House had imposed a Sept. 20 deadline for ByteDance to come up with a plan to sell the video app’s U.S. operations or be banned by Sept. 29. A deal would have to be done by Nov. 12. But Beijing had pushed back on a tentative sale of U.S. assets, saying it would need to approve a deal that involves exporting the lucrative artificial intelligence technology used by TikTok.

Relations between the U.S. and China have deteriorated considerably in recent years due to a trade war and a race to establish dominance in crucial areas of technology including 5G and semiconductors. Washington has targeted Chinese tech companies like Huawei and upped the pressure on the likes of ByteDance and Tencent, making it more difficult for them to operate in the U.S.

CNBC’s Alex Sherman contributed to the report. 

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Yale president emeritus on digital learning, coronavirus impact on education

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A New York City student listens to daily lesson plan videos from her teacher as schools move to online learning amidst the coronavirus pandemic.

Adam Jeffery | CNBC

The pandemic has had a “massive impact” on students — and there’s a widening gap between those who can tap on online learning and those who can’t, says Yale University’s president emeritus.

“It’s a massive impact … about 1.6 billion students were displaced from their schools, all the way from kindergarten to university. And so the impact’s been huge,” Richard Levin told CNBC as one of the attendees of the Singapore Summit, which is being held virtually this year.

“There’s been quite a bit of resiliency — students are learning — although there’s a tremendous gap opening up between students who are most capable of taking advantage of online resources and those who can’t,” he added. He flagged crowded home environments which are “inhospitable” to learning digitally, as one problem.

Many schools have turned to digital learning to replace classroom education as the virus spread widely across the world. As many as 192 countries shuttered schools, leaving 1.6 billion students without in-person learning, the United Nations said this week.

The UN projected that at least 24 million students may still drop out of school, as millions do not have internet access or devices to participate in virtual learning. The reopening of schools has become a hot-button issue, particularly in the U.S., where President Donald Trump has pushed to reopen schools regardless of how widely the virus is spreading in the community.

But Levin highlighted that online platforms such as Coursera, which offers some free online courses, is fully accessible on mobile phones. He was formerly the chief executive officer of Coursera and remains a senior advisor.

“The penetration of mobile phones in developing countries is getting to be pretty extensive. There’s a significant remaining problem, particularly in Africa, about access, but things are improving considerably,” he said.

“One thing we’ve learnt in this period, where universities were forced to go online, is that all of the lessons that platforms like Coursera have learnt over the last eight years or so have come in to be incredibly useful for existing efforts by universities … We’re seeing a tremendous increase in utilization of online platforms over the past six months,” said Levin.

— CNBC’s Will Feuer contributed to this report.

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Goldman Sachs sees Chinese yuan strengthening over the next 12 months

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A Chinese clerk counts renminbi yuan banknotes at a bank in China on December 2015.

Jie Zhao | Corbis News | Getty Images

SINGAPORE — Goldman Sachs expects the onshore Chinese yuan to strengthen to 6.5 per dollar over the next 12 months, according to Timothy Moe, co-head of Asia macro research and chief Asia-Pacific equity strategist at Goldman Sachs.

“We’ve recently firmed up … in particular, our Chinese renminbi forecast from 6.7 to 6.5 on a 12 month view,” Moe told CNBC’s “Squawk Box Asia” on Thursday, adding that it was one of the firm’s “strongest views” for Asian currencies.

In comparison, the onshore Chinese yuan changed hands at 6.7767 per dollar in the afternoon of Asian trading hours on Thursday. Its offshore counterpart traded at 6.7764 per dollar.

That comes as the dollar is in a “structural period of weakening” after being quite strong over the last few years, Moe said. He added that the driver behind this phenomenon was “the loss of U.S. exceptionalism” as factors that previously propped the dollar up, such as relatively better economic growth stateside, have “gone into reverse.”

Both the onshore and offshore Chinese yuan saw a dramatic strengthening this week from levels above 6.8 against the greenback. That came as data from China’s National Bureau of Statistics showed the country’s first positive retail sales report for 2020 in August.

‘Tailwind’ for Chinese stocks

Moe said the strength of the Chinese currency would serve a “tailwind” for stocks in the country.

“Historical evidence is very, very clear that a strengthening currency is generally supportive for the equity market,” he said.

In particular, the more domestic-oriented parts of the market are likely to benefit as the external-facing sectors “become incrementally less competitive” against the backdrop of a stronger currency, the strategist said.

As a result, Moe said a strong Chinese yuan would tend to “tilt” one’s investment focus more toward the domestic part of the economy where the “real kind of juicy stories” — such as the rise of the digital economy, new infrastructure as well as the digitization of the consumption of goods and services —  reside.

“The (yuan) would be just an extra tailwind for those ongoing structural themes,” Moe said.

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U.S. pushes arms sales surge to Taiwan, needling China: Reuters

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Four US-made F-16 fighter jets cross the sky during a drill near the Suao navy harbour in Yilan, eastern Taiwan, on April 13, 2018.

Sam Yeh | AFP | Getty Images

The United States plans to sell as many as seven major weapons systems, including mines, cruise missiles and drones to Taiwan, four people familiar with the discussions said, as the Trump administration ramps up pressure on China.

Pursuing seven sales at once is a rare departure from years of precedent in which U.S. military sales to the island were spaced out and carefully calibrated to minimize tensions with Beijing.

But the Trump administration has become more aggressive with China in 2020 and the sales would land as relations between Beijing and Washington are at their lowest point in decades over accusations of spying, a lingering trade war and disputes about the spread of the novel coronavirus.

At the same time Taiwan’s desire to buy weapons increased after President Tsai Ing-wen was re-elected here in January and has made strengthening Taiwan’s defenses a top priority.

Taiwan is China’s most sensitive territorial issue. Beijing says it is a Chinese province, and has denounced the Trump administration’s support for the island.

Washington has been eager to create a military counterbalance to Chinese forces, building on an effort known within the Pentagon as “Fortress Taiwan,” as Beijing’s military makes increasingly aggressive moves in the region.

Taiwan’s Defense Ministry said the reported package was a “media assumption,” and that it handled weapons purchase talks and assessments in a low-key, confidential way, so could not offer public comment until there was a formal U.S. notification of any sales to Congress.

Taiwan’s military is well-trained and well-equipped with mostly U.S.-made hardware, but China has a huge numerical superiority and is adding advanced equipment of its own.

The weapons packages from Lockheed Martin, Boeing and General Atomics are moving their way through the export process, three people familiar with the status of the deals on Capitol Hill said, and a notification to Congress is expected within weeks.

One industry source said President Donald Trump was slated to be briefed on the packages this week by Secretary of State Mike Pompeo. Some of the deals had been requested by Taiwan more than a year ago, but are only now being moved through the approval process. A State Department spokesman declined to comment.

A senior U.S. official, citing Chinese assertiveness in the Taiwan Strait, said: “There is no equilibrium today. It is out of balance. And I think that is dangerous.”

Trump’s White House has made an here effort to export weapons to U.S. allies trying to bolster their defenses, decrease dependence on U.S. troops while boosting U.S. companies and jobs.

As he fights for re-election on November 3, Trump and Republican supporters have ramped up their rhetoric against Beijing and sought to portray Democratic opponent Joe Biden as soft on China.

Other factors include Taiwan’s bigger defense budget, and the fear in Taiwan that if Trump loses, Biden would be less willing to sell the U.S.’s most advanced weapons to them.

Taiwan’s interest in U.S. weapons and equipment is not new. The island is bolstering its defenses in the face of what it sees as increasingly threatening moves by Beijing, such as regular Chinese air force and naval exercises near Taiwan.

The senior U.S. official said Taiwan’s increased defense spending was a good step, but it had to do more.

“Taiwan, frankly, needs to do more in order to ensure that they indigenously have an ability to deter Chinese aggression,” the official said.

Deals

Drones that can see over the horizon for surveillance and targeting, coupled with advanced missiles and coastal defenses that include smart mines and anti-submarine capabilities to impede a sea invasion, have been discussed at the highest levels to make Taiwan more difficult to attack, like a “porcupine.” according to industry and congressional sources.

A Lockheed Martin-made High Mobility Artillery Rocket System (HIMARS), essentially a truck-based rocket launcher, is among the weapons Taiwan wants, people familiar with the negotiations said. Taiwan also seeks to buy sophisticated anti-tank missiles.

In early August, Reuters reported that Washington is negotiating the sale of at least four of its large sophisticated aerial drones to Taiwan for what could be about $600 million.

Also under discussion are land-based Boeing-made Harpoon anti-ship missiles to serve as a coastal defense against cruise missiles.

Other systems include “underwater sea mines and other capabilities to deter amphibious landing, or immediate attack,” Taiwan’s de facto ambassador here to United States said in July.

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