Beijing's surprise intervention on Meta's Manus rattles tech founders, VCs eyeing 'China shedding'

Recent events have stirred considerable excitement and concern in the tech industry, particularly following Meta's acquisition of Manus, an AI startup from Singapore with Chinese origins, for a staggering $2 billion late last year. Many Chinese entrepreneurs viewed this deal as a crucial endorsement of the 'Singapore washing' strategy, which allows companies to relocate to Singapore to sidestep scrutiny from both Beijing and Washington. However, that optimism was abruptly dashed when China intervened, intensifying its campaign against local AI founders who consider moving their operations overseas. Reports have emerged that the Chinese government is investigating whether the sale of Manus transgressed regulations related to technology exports and outbound investments. Moreover, co-founders Xiao Hong and Ji Yichao have been barred from leaving China for Singapore. Founded in China, Manus made the strategic decision last year to shift its headquarters and core teams to Singapore, enabling it to tap into a larger pool of foreign investments, including from renowned Silicon Valley venture capital firm Benchmark. The startup gained significant attention in the U.S. by creating an AI agent capable of autonomously building websites and performing basic coding tasks. Yet, this investment attracted scrutiny in mid-2025, as U.S. lawmakers moved to prevent American investors from directly supporting Chinese AI enterprises. This escalating review by the Chinese authorities has left many in the tech community, including founders and VCs, grappling with uncertainty about their future. Wayne Shiong, managing partner at Argo Venture Partners, noted that the path taken by Manus would likely dissuade others from pursuing similar offshore strategies. Instead, many founders are now contemplating establishing their businesses outside of China from the very beginning, to avoid complications further down the line. Despite the challenges, Shiong emphasized that founders still see the potential benefits of securing U.S. backers, as Chinese AI startups typically receive lower valuations compared to their U.S. counterparts. The Manus deal coincided with a period of heightened rivalry between the U.S. and China in the AI sector, where competition increasingly hinges on access to advanced technology and the movement of talent. Yuan Cao, a legal expert in Beijing, underscored that Beijing views it as a significant concern when companies develop technology in China only to later transfer assets overseas. He pointed out that the location of product development may hold more significance than the registration of the holding company itself. Experts like Matthias Hendrichs, who advises global AI companies in Singapore, suggest that merely establishing a local entity and hiring a few staff members is inadequate. He insists that a comprehensive transition involving moving the entire team and customer base is essential for true compliance. The Manus deal has also highlighted the challenges facing tech investors who believed that offshore setups could insulate promising Chinese startups from government intervention. Alex Ma, managing partner at Alpha Omega Holdings, remarked that Chinese authorities would likely probe beyond the superficial aspects of a company to examine its core operations, including technology and talent. While there is speculation about what further actions the Chinese government may take regarding the founders' exit bans or the potential unwinding of the Manus transaction, the deal was finalized with over 100 Manus employees integrated into Meta's Singapore office by early March. A Meta spokesperson confirmed that the acquisition complied with all relevant laws and anticipates a favorable resolution to the inquiry. As Beijing continues its review process, the tech landscape remains fraught with uncertainty, especially for startups that have established operations outside of China. Questions linger about whether outsourcing work to teams based in China constitutes a breach of technology export regulations. Allen Wang, co-founder of Cognitio Labs, expressed that clarity often emerges only when a situation garners enough attention to provoke government scrutiny, leaving many founders in limbo regarding their operational strategies.