BREAKINGVIEWS-Meta AI deal exposes China tech dilemma

By Robyn Mak

HONG KONG, Jan 21 (Reuters Breakingviews) - Artificial intelligence startup Manus is putting Beijing in a quandary. Authorities are investigating the China-founded company's move to Singapore and subsequent $2 billion-plus sale to U.S. social-media empire Meta Platforms META.O unveiled in late December. Officials are understandably anxious about talent flight, particularly in a strategic technology like AI. At the same time, though, keeping founders in China leaves them at the mercy of hard-to-solve price wars, a funding crunch and chip shortages.

Manus's journey so far has taken it from becoming one of China's hottest AI firms to a high-profile proposed acquisition in just a matter of months. In March, the then-three-year-old company shot to prominence after releasing a video demonstrating what it claimed to be the world's first general AI agent that could tackle complex tasks such as screening and ranking job applications as well as creating spreadsheets, websites and in-depth research reports. It secured $75 million in a funding round led by U.S-based Benchmark at a $500 million valuation, Bloomberg reported in April, citing sources. By July, however, local Chinese media reported that Manus had laid off most of its staff in the People's Republic, shuttered its mainland services, and deleted all content from its domestic social media - all part of a broader move to Singapore, where it is currently based.

That Manus may be more of an exception than a rule will be of little comfort to Chinese officials, who have already started to identify China-developed AI technologies to potentially add them to an export control list, the Wall Street Journal reported this month, citing sources. Part of the reason may be practical: current export controls mainly target core technologies like frontier models from DeepSeek, putting hard-to-categorise software like AI assistants in a regulatory grey zone, reckons Poe Zhao, a China tech analyst and founder of Hello China Tech. Establishing clear rules and guidelines for such emerging tech makes sense.

But Manus, which doesn't have its own model, also shows that innovative applications are coveted by even the world's biggest technology firms. Whether its acquisition, which values the startup at up to six times more than its recent funding round, secures Beijing's blessing will be closely watched by peers in China.

There, entrepreneurs face ruinous price wars, limited appetite from consumers and businesses to pay for AI, uncertain regulations, a sharp decline in foreign investors - once a key support for startups - plus Washington's semiconductor restrictions. All of this has helped thin out the country's once plentiful unicorn flock. Even President Xi Jinping noted it back in 2024, asking why the number of $1 billion-plus startups had dwindled. Manus has generated a decidedly awkward answer.

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CONTEXT NEWS

China's Ministry of Commerce on January 8 said it is working with relevant departments to assess and investigate Meta's acquisition of artificial intelligence startup Manus. The deal values the company, which was founded in China and is now based in Singapore, between $2 billion to $3 billion, Reuters reported on December 31, citing sources.

Companies engaging in activities such as foreign investment, technology exports, data transfers abroad and acquisitions must comply with Chinese laws and regulations, ministry spokesperson He Yadong said at a press briefing.

A Meta spokesperson told Bloomberg that “there will be no continuing Chinese ownership interests in Manus AI following the transaction, and Manus AI will discontinue its services and operations in China".

The Financial Times reported on January 6 that the ministry had begun assessing whether the relocation of Manus's staff and technology to Singapore and subsequent sale to Meta required an export license under Chinese law, citing two people familiar with the matter.