I agree with your assessment, however I don't think the response is more surveillance. If recent data breeches have taught us anything it is that data aggregation (necessary for surveillance) is just another source of Chinese intelligence.

The solution to this (and other problems of social engineering) is to educate the general (democratic) population, so they are aware of and resilient against such attacks. I don't think it's possible to stop everyone from using a given service, but if every user understands the real tradeoffs, then we have a chance. If individuals (and more importantly voters) cannot think and reason for themself, given the facts of a given subject, democracy has no future.

In general though, I think people are smart. They make decisions and tradeoffs with the information they have. The problem here is that they don't understand the real risks. More than the loss of privacy and security, the real problem here is that a hostile nation state seeks to influence the thoughts of free citizens of other (democratic) countries. This is how wars are won and lost -- in the hearts and minds of the people. If everyone who used TikTok saw the situation in a similar light, I doubt it would have the adoption it currently has.