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In an unprecedented move, China has blocked Meta’s acquisition of Manus, a Singapore-based AI company.
The country argued that its technology was developed on Chinese soil and, as such, it falls under Beijing’s jurisdiction, even if the business no longer has any presence in China (and never offered its services locally).
It’s difficult to describe this as a straightforward “block,” however, as the transaction has already been completed: all parties have received their payouts, and Manus’ founders have formally joined the US company.
Beijing is effectively trying to unwind an agreement that occurred entirely abroad and, in the process, asserting jurisdiction over sovereign countries.
Short term pain, long term gain for Singapore
Undoubtedly, this isn’t good news for Singapore, which has recently been seen as a good intermediary for Chinese companies seeking capital in the far more open foreign markets (chiefly the US). With Beijing trying to burn this bridge, many founders may fall in line to avoid drawing Xi Jinping’s ire.
This could make Singapore less attractive for businesses of Chinese origin, which have increasingly picked it as a global springboard over Hong Kong.
However, if history teaches us anything, it’s that, in the long run, bureaucratic barriers end up motivating entrepreneurs to find ways around them.
In fact, even Manus’ founders seem to have anticipated these problems ahead of time and preemptively laid off all of their staff, based in Wuhan and Beijing, and shuttered all offices, before fully relocating to Singapore by mid-2025.
The company developed what it calls the first general AI agent, which can perform many diverse tasks you ask of it (looking for information, building websites, preparing documents, etc.), attracting the attention of Meta, which has already started deploying its algorithms on its social media platforms.
Manus’ creators made one mistake, though—they remained in the country, which they were barred from leaving in Mar, pending the outcome of the official inquiry into the deal.
Beijing has reportedly given the companies several weeks to restore Manus’s Chinese assets to their original state, including removing any data or technology transferred from Meta. Authorities have also warned that penalties could follow if the transaction cannot be fully unwound.
A familiar pattern of regulatory intervention
This isn’t the first time Chinese regulators have moved to rein in what they likely perceive as excessive autonomy among prominent business figures.
The most famous tectonic fracture occurred in 2020, when Jack Ma’s Ant Group IPO was abruptly cancelled just days before it was due after China’s most famous tech founder criticised financial regulators for stifling innovation.
Since then, Ma has all but disappeared from the media and lost a good deal of his fortune.
While it may have been seen as a triumph of the ruling party, it chilled the entire private sector and was one of the reasons why entrepreneurs like those behind Manus AI have been looking to find a way out of China.
However, with the economy showing signs of stagnation in the post-COVID years, Xi Jinping himself had to try to mend relations with the private sector last year, hoping it could help boost domestic growth. He was even recorded shaking Jack Ma’s hand.
The truth is, however, that the damage of the preceding years cannot be easily fixed, and businesses need more than just symbolic gestures. Last-minute crackdown on Manus’ acquisition is an event comparable (if not greater) in magnitude to Jack Ma’s exile from the public arena.
It also signals to local founders that the ultimate owner of their intellectual property is the state, and that it can intervene even after they closed their deals with foreign investors, while putting them de facto under “house arrest.”
But local startups are in a bind, since the Chinese capital market is not as deep as the American one is, and that too is a consequence of government policies.
Until now, domestic innovators could seek to use third parties like Singapore to connect with foreign investors. But now, they may simply move abroad before any substantial work is done on Chinese soil. Otherwise, they risk potentially losing the fruits of their labour (if not more).
Curiously, Singapore has an example of how that is done as well.
The Shopee model
One of the richest Singaporeans—and the most successful local tech entrepreneur—Forrest Li, hails from Tianjin.
Educated in Shanghai and Stanford, he came to Singapore 20 years ago as a graduate with a mountain of student debt, sharing a single rented bedroom with his wife in an apartment in Braddell.
By 2009, he had founded Garena before launching Shopee in 2015, already as a Singapore citizen.
He’s an example that Chinese entrepreneurs can succeed enormously even if they leave the country early in their lives and settle in a culturally familiar Singapore. After all, on the e-commerce front, he has beaten Jack Ma himself, after Alibaba-acquired Lazada, once the market leader in Southeast Asia, floundered in competition from upstart Shopee.
As a result of Beijing’s clampdown on the foreign funding of Chinese startups, Singapore may soon see more talented Chinese engineers looking to try their chances at a breakthrough away from their homeland.
Beijing’s attempt to ringfence domestic innovation in sensitive areas like AI may backfire painfully, as those with the best ideas may simply seek to leave the country to the US or Singapore and build their products from the ground up there.
Let’s remember that due to conflicts between Beijing and Washington, Chinese AI companies are already facing restrictions on access to the most advanced semiconductor products, which they would not suffer abroad.
What happened to Manus may only encourage them to make the leap abroad much earlier than planned. And Singapore is there to catch them.
- Read other articles we’ve written on Singaporean businesses here.
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