Why China Blocked Meta’s $2 Billion Acquisition of Manus AI

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1:45Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. Bloomberg Audio Studios. Podcasts. Radio. News. The global AI industry is reeling from an announcement made by Beijing that the Chinese government is blocking Meta's acquisition of an autonomous AI agent startup called Manus, a company that had its start in China. Of course, China has moved here to block this$2 billion acquisition It was a surprising statement, not because the deal was controversial, but because it came four months after the acquisition was announced. Well, everyone really thought of the deal as being done because it had happened months ago.

2:32New Lee Purnell covers Asia Tech for Bloomberg out of Hong Kong. He says in the past it was common for Chinese startups looking for access to global funding to move their operations out of China. Business-friendly Singapore has been a preferred destination. By the time Meta's buyout was announced, Manus had made that move. An integration of Meta and Manus has been underway for months now. Most, if not all, we believe of Manus' employees had moved from the mainland to Singapore. Manus' staff had been integrated into Meta. We assume the technology had been as well since it's been so long. And then all of a sudden, you have Beijing saying, actually, no, can't do it.

3:15The question now really is, what does that mean? Can they unwind it? Beijing hasn't offered more details. But the announcement sent a clear message. Just like the U.S., China is prepared to act aggressively to secure key technologies and prevent them from going overseas. Manus hasn't responded to Beijing's statement. On an earnings call last week, Meta CFO Susan Lee was asked about the announcement and said, On Manus, we're still working through the details, so we don't have an update right now. A few months ago, Manus was a viral tech sensation. Today, it's a potential geopolitical flashpoint.

3:58The idea that China wants to try to reverse an acquisition that was assumed to have been completed is startling. Lulu Chen, Bloomberg's managing editor for Asia Finance, says the bigger story here is what this episode could mean for China's broader startup community. When I talk to investors and some entrepreneurs, essentially what people are saying is that this method or this template that Manus created, which is to base your company out of Singapore and seek that route to become international, Singapore washing is dead.

4:43This is the Big Take Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show, the madness madness. How do you unscramble a$2 billion deal? And is this the end of the road for Chinese entrepreneurs looking for a global exit?

5:15In January of last year, DeepSeek's debut rattled global markets. The Chinese chatbot challenged investor assumptions about the cost of building large language models and wiped almost a trillion dollars off valuations of U.S. tech stocks. The AI arms race had a new, low-cost frontrunner. And while the markets were still reeling from the deep-seek shockwave, another Chinese AI quietly surfaced on YouTube. Hi, I'm Peak from Manus AI. For the past year, we've been quietly building what we believe is the next evolution in AI. And today, we're launching an early preview of Manus, the first general AI agent.

5:53Ji Yichao, who goes by the nickname Peak, is one of the co-founders of Manus. In the video, he introduces Manus and promises something different, an AI that can act on your behalf, not just answer your prompts. When you think about what LLMs do, so a chatbot, you type in text, it gives it back. Okay, that's great. That's Bloomberg Asia tech reporter, Nuli Purnell. What was really interesting about Manus and this new phase that tech leaders are talking about of Agentikei is what Manus can do is actually go out into the internet world and do things for you the way an assistant might. Manus was founded in 2022 by a group of young Chinese entrepreneurs with offices in Wuhan and Beijing.

6:36From the beginning, Manus adopted a culture that followed classic Silicon Valley startups. One of our colleagues saw a sign in the office that said, essentially, the mentality of let's make stuff happen. Let's think big picture. Let's get stuff done. Move fast. So very much that Silicon Valley style of mavericks. Be a cowboy at the idea that you have to just go out there and get stuff done and be bold. By mid-2025, Manus had followed a growing trend among Chinese startups. Leaving China. It relocated its headquarters to Singapore and shed most of its China-based staff. It is a path that other startups have done before.

7:20Singapore washing is the term. So the idea is we can become an AI company for the world, not just to remain in China and serve the admittedly large China market, but we can go abroad to Singapore, access international capital, be seen as a Singapore-based company, and more easily tap global users and international money. And it wasn't long before Manus started drawing attention from the biggest players in Silicon Valley. One of the early investors in Manus said that Mark Zuckerberg himself had been a very early and enthusiastic user of Manus. So it caught the attention of some very powerful people in Silicon Valley not long after its emergence.

8:05Now, we did an episode on how OpenClaw has generated a lot of attention in China, and there's a lot of hope for that when it comes to agentic AI. How is Manus different from OpenClaw and others that are out there? A couple things. One, Manus is meant to be more autonomous. So it's meant to operate with less oversight. You tell it what to do, and it can essentially go out and do things. The other, which was immediately apparent to me when I used it, is how user-friendly it is and how polished it feels. So unlike some of these tools that you kind of feel like, oh, do I need to learn how to write code, or what do these buttons do?

8:42It's very simple. It's just a very simple website and app that almost looks like Google or like a chatbot. You just enter things and ask it to do it. Very clean interface. It felt very polished. So autonomous and user-friendly, I would say, are two distinguishing features. Meta's Mark Zuckerberg was so enamored of Manus that he decided to buy it. Meta announced the acquisition last December. Now, normally, that would be the end of the story. But almost immediately, China raised a red flag. Beijing announced an inquiry into the deal in January. That resulted in last week's demand that the deal be canceled.

9:21What stunned the tech world was Beijing effectively claiming jurisdiction over Manus under Chinese law, even though the company had moved its headquarters to Singapore. The announcement came in recent days providing little detail from Beijing, Just a very simple, essentially one sentence statement saying that the government would not allow foreign investment into the startup. And that was due to rules and regulations. It didn't say anything beyond that. I mean, are there any actions that Beijing can realistically take at this point? Yeah, it's an interesting point. We understand that two of the founders were asked to return to the mainland and are there.

10:04And so Beijing can restrict the movement. But again, the technology would appear to have already been absorbed by Meta. Some people have raised the issue of, well, OK, if you force the deal to be unwound and you say to Manus, you have to give the money back to Meta. If Meta has already incorporated all this sophisticated technology, essentially they've gotten it for free. Beijing's claim that it has jurisdiction over the Manus-Meta acquisition plunges the deal into a legal gray area. And just as important, the news that Manus' founders are reportedly barred from leaving China sent a chill through the country's tech sector.

10:43After the break, what Beijing's new assertiveness means for Chinese startups and the foreign investors who want a piece of them.

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13:10For most of the last two decades, Chinese tech companies have grown using a simple formula. Chinese talent plus American venture capital equals global dominance. Here's Lulu Chen, Bloomberg's managing editor for Asia Finance. China's first generation of technology companies, think about Sohu, Baidu, Alibaba, even Didi. These companies, they all followed this money trail or benefited from this money trail. and U.S. investors indirectly through the pensions and endowments that invested in these tech firms also made huge returns. It used to be that if a Chinese founder got a check from a top U.S.

13:57fund, it was a stamp of approval. But that changed about a decade ago, Lulu says, right about when President Donald Trump took office the first time around. That's when his administration began using CFIUS, short for the Committee on Foreign Investment in the U.S., to put pressure on China. When geopolitical tensions started escalating, in the U.S. you have this thing called CFIUS. And that's where foreign money investing in core U.S. assets get vetted, right? But during Trump's first term, people started asking questions like, why are people channeling this pool of money to funding technology in China and ensuring the survival and success of Chinese companies?

14:44And so that became, you know, the origins of what is now known as reverse CFIUS. And it came into effect a few years ago. So right now, anything that is related to investment in AI and advanced semiconductors, these are areas that U.S. pensions, for example, would not be allowed to invest in. Now, Lulu, you've covered tech for a lot of years. Here we've got a situation where Chinese regulators are blocking the Manus meta deal after the fact. What surprised you most about this latest development? I think what's most shocking for investors is how fast the deal turned from a celebration of Chinese entrepreneurship, global acceptance of Chinese AI technology development into a case where entrepreneurs and investors are almost back at ground zero again, where the importance of geopolitical conflicts and also the optics of how deals are done has become so much more important.

15:53And it sends a chilling effect to Chinese entrepreneurs who want to take the same kind of route that Manus did. It also completely remaps how Chinese entrepreneurs think about when they have aspirations to expand their businesses globally. Now, how do you think this Manus episode changes the way that VCs work on the ground in China, but as well as VCs from the U.S.? Are there at this point options for American companies that still want to invest in China? Yeah, there are still options. One of the structures that is becoming increasingly popular right now is a so-called parallel structure. So if U.S.

16:40investors, this would be like pensions, endowments, institutional LPs, if they still want to gain exposure to China, they can go in and invest in companies that are nonsensitive together. For example, consumer industries. And then for any sensitive company like advanced AI, the U.S. investors would opt out. The reason it's appealing is it just lessens the reporting burden for these U.S. investors. And structurally, it's clean for the separation. Hmm. So does that mean then that American investors and American money are completely out of AI then? So they can invest in semiconductors that are not cutting edge.

17:29They would still have to report that. If it's advanced chips, then yeah, cannot. AI, advanced AI, no, they cannot. But if it's consumer AI, something, for example, you're using AI as a marketing. that's not considered a vast AI. And, you know, those companies might still be able to, you know, fall into that area where that is permissible. And how viable do you think is this parallel structure of investing? Can you still make a lot of money? Is it still worth it? Well, if your goal is to invest in the next trillion dollar company that's going to be dominant in the AI era, then no, this is not right.

18:11This would be for people who for institutions who still believe in China growth and want exposure to that. But you're not going to be investing in the next like open AI. And what about now? Does China tech even need U.S. money now? So right now, China has a lot of yuan funds. A huge part of it is government driven, local government vehicles that provide financing. There's pros and cons for taking money from the government. Some of it could include that you have to implicitly guarantee returns. There's a lot of baggage that comes with taking money from these investors. But, you know, it has created this parallel system where there are companies that only take money from yuan funds, and they still make it to IPO to the listing stage.

19:05Now, Lulu, we've seen Beijing flex its muscles before. In 2020, they pulled the plug on Ant Group's IPO. In the following year, they effectively forced Didi right off the New York Stock Exchange. And you reported on both of those developments in depth. Does this Manus intervention fit into that pattern somehow? It fits into the pattern of the Chinese government seeking more control over its national champions in tech. And in this case, even though Manus relocated to Singapore, they still see it as a Chinese company. Where it's slightly different, I would say, is that with Ant, it was more about the guarding of the financial systems rails and financial stability.

19:53With Manus, it falls in more into the geopolitical conflict with the U.S. category. Lulu says at this point, what matters most isn't whether the deal would be unwound and how. It's that Beijing's statement is an important symbolic message. To me, what's more important is sending a message to other people who want to take the same route as madness. That's actually more important. Because for the deal itself, a lot of it has been already done. Maybe some of the money that Meta paid can be recouped. But I would say the more important thing here is the message that they're sending to everyone else who's thinking of doing the same thing.

20:37And the message is? Don't follow the Singapore washing path. And any thoughts in terms of how you think this might heat up the AI race between the U.S. and China? It's accurate to say we are in a pivotal moment in the AI race at this moment. You're seeing the LLMs right now going through the second iterations or generations of becoming even more advanced. And right now, the estimates are anywhere from like a few months to maybe one to two years. The gap between China and the U.S. And in some areas, China might be even more advanced, like the consumer AI front. That's why we're seeing so much focus on how money flow and also how technology is shaping the industry in both countries.

21:30And probably with a lot more to come, I imagine, in terms of these tensions. Yeah.

21:42This is The Big Take Asia from Bloomberg News. I'm Wan Ha. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you like the episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

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