The United States and China are fiercely competing to develop the world’s most advanced AI technology. China is investing heavily in its domestic AI models, tightening control over its technology sector, and is concerned about its top AI talent moving to U.S. companies. Despite this, Manus, a highly regarded Chinese AI startup, has discreetly moved its operations to Singapore and was acquired by Meta for $2 billion.
Was it expected that this merger would not face scrutiny?
Manus gained attention last spring with a demonstration video featuring an AI agent capable of screening job candidates, planning vacations, and analyzing stock portfolios, claiming to outperform OpenAI’s Deep Research. Shortly thereafter, Benchmark, a prominent Silicon Valley venture firm, led a $75 million funding round valuing Manus at $500 million. This move was unexpected. (Senator John Cornyn expressed his views, tweeting, “Who thinks it is a good idea for American investors to subsidize our biggest adversary in AI, only to have the CCP use that technology to challenge us economically and militarily? Not me.”)
By December, Manus had attracted millions of users and generated over $100 million in annual recurring revenue. Then Meta expressed interest, and Mark Zuckerberg, who has emphasized the importance of AI for the company’s future, acquired Manus for $2 billion. This acquisition was also unexpected.
It’s important to highlight that Manus did not simply sell itself to an American buyer; it spent much of last year trying to operate independently of China. The company moved its headquarters and core team from Beijing to Singapore, restructured its ownership, and after the Meta acquisition, Meta committed to severing all ties with Manus’s Chinese investors and shutting down its China operations. Manus was determined to establish itself as a Singaporean entity.
While these developments were noteworthy in Washington, they likely caused significant concern in Beijing.
China uses a term for this phenomenon: “selling young crops” — referring to domestic AI companies that relocate abroad and sell themselves to foreign entities before fully maturing, taking their intellectual property and talent with them.
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Beijing is notably opposed to this practice and has made extensive efforts to ensure that no company operates beyond its control. Remember the incident in 2020 when Jack Ma criticized Chinese regulators and subsequently vanished from public view for months; Ant Group’s major IPO was abruptly halted, and Alibaba received a $2.8 billion fine. China then systematically dismantled its thriving tech sector, erasing hundreds of billions in market value. Chinese leaders are often direct, not subtle.
Thus, it was not entirely surprising when the Financial Times reported on Tuesday that Manus co-founders Xiao Hong and Ji Yichao were summoned to a meeting this month with China’s National Development and Reform Commission and informed that they would not be permitted to leave the country for some time.
No formal accusations have been made — only an investigation into whether the Meta acquisition breached Beijing’s foreign investment regulations.
Beijing describes it as a standard regulatory review.
Someone at Manus might have thought they had evaded repercussions, and perhaps they still might. However, given the high stakes in the AI competition, it was always a significant risk. Now, Beijing seeks explanations; Manus’s founders appear to be staying put until those explanations are provided.
