Americans Invested Billions in Chinese Companies. Now Their Money Is Stuck.

When investors talk about “zombie” companies, they’re usually referring to distressed start-ups that are hobbling along, unable to grow and unlikely to ever return the money they’ve raised.

But as deal makers feverishly debated efforts this week by lawmakers to force TikTok’s Chinese parent company, ByteDance, to sell the app, they talked about a new version: China zombies.

China zombies may have booming businesses, but they’re unlikely to provide investors with any immediate return because they’re stuck in geopolitical cross hairs.

It’s not just the investors in ByteDance who, after handing it more than $8 billion, are stuck. What looked like a mammoth growth opportunity just a few years ago — inspiring investors to pour money into companies like Ant Financial, PingPong and Geekplus — has turned hostile.

“There’s more out there like ByteDance,” Evan Chuck, a partner at the advisory firm Crowell, said of companies with investors who may find themselves in this position. “It’s only really heating up further.”

Selling is increasingly a long shot. Take TikTok. Even if ByteDance puts the app up for sale, the Chinese government is unlikely to allow the company’s most valuable asset, its recommendation algorithm, to be included. The country introduced new export control rules for technologies like that algorithm in 2020, just as TikTok was nearing a deal with U.S. buyers (which eventually fell apart).

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