Why China blocked the Meta-Manus deal and what it says about AI race
When Meta Agreeing to buy Manus, a Singapore-based AI startup of Chinese origin, for about $2 billion last December, many viewed the transaction as a run-of-the-mill deal in today’s global tech economy: as capital moves across borders, startups move to friendlier jurisdictions, and major platform companies acquire talent and intellectual property in the race to build the next generation of AI systems.
But for those who follow the US-China strategic competition, especially in the fiercely contested technology sector, this announcement should have raised yellow flags, if not red flags. What initially seemed like a simple purchase soon turned into something much more significant.
This week Beijing ordered the deal to be reversed, and Meta has indicated it will comply, at least for now. Mark Zuckerberg may seek help from US President Donald Trump during his anticipated visit to China, but for those who think China still operates within a global economic system largely shaped by Western rules and institutions, events like these offer another bold reminder of how Beijing approaches technology, investment and competition.
Manus’ situation is the latest in a long series of developments that reveal how China plans to compete in these sectors. Antitrust law, investment restrictions, and regulatory authority are not only tools used by Western governments. Beijing has its own versions of these tools and has shown that it is prepared to use them just as forcefully when technological capabilities or national interests are at stake; In Manus’ case, it does so to advocate for an innovation ecosystem, a technology stack, and an engineering talent base that it is committed to preserving.
Officially, the decision to halt the transaction will likely be justified under China’s Anti-Monopoly Law. Regulators may argue that the law provides legal grounds to ban foreign investment on Manus and require parties to cancel the agreement. But the series of events surrounding the acquisition makes clear that the issue was never just about antitrust law.
Beijing has long treated high-tech transactions as a matter of national security, even if the legal framework is based on competition policy. Chinese officials reviewing the purchase reportedly described it this way: “conspiracy” attempt to drain the country’s tech base – language that should scare anyone looking for agreement in this area. Regulators reviewed the transaction through multiple channels, including export control rules, foreign investment restrictions and competition law. At one stage of the vetting process, authorities even restricted two Manus co-founders from leaving the country, according to the Financial Times.
These are not typical features of a traditional antitrust investigation. These reflect a government determined to prevent the export of technological capabilities it considers strategically important, especially those that could benefit its main geopolitical rival.
‘Singapore wash’ won’t work
The episode becomes even more revealing when viewed in light of Manus’s earlier corporate move. Last summer, the company ceased operations in mainland China and moved to singapore. The restructuring has been reviewed by Chinese regulators, including the National Development and Reform Commission. Authorities initially concluded that relocation did not require strict controls. The decision reflected a common pattern in China’s tech sector, where startups set up offshore corporate structures to gain access to global capital and reassure foreign investors, sometimes tempering regulatory scrutiny while retaining engineering talent and intellectual ties to the mainland.
This movement reflects a broader phenomenon sometimes described as the “Singapore wash”. In recent years, many Chinese technology companies have moved their corporate headquarters to Singapore in an attempt to promote themselves as global companies rather than Chinese firms. But the Manus incident shows the limits of this strategy. Shifting company registrations overseas does not put a company outside China’s cross-border control and regulatory reach, as long as its technology, founders, or research ecosystem remain connected to the mainland. What some entrepreneurs see as regulatory arbitrage, from Beijing’s perspective, increasingly resembles an attempt to move strategically important technology assets beyond state control.
The Chinese government’s determination to ensure this does not happen was made clear when Meta emerged as the acquirer. According to multiple reports, the decision to block the purchase went beyond economic regulators to China’s National Security Commission, the Communist Party body headed by Xi Jinping that oversees national security strategy. Institutional distinction is important. The National Development and Reform Commission is a ministerial-level agency of the State Council and functions as a central economic planning and industrial policy body within the Chinese government. The National Security Commission, by contrast, is not a state regulator but a high-level Communist Party body that coordinates national security strategy across the party-state system.
In China’s governing structure, the Communist Party sits above the formal institutions of the state, and party organs ultimately shape the strategic direction implemented by government institutions. The calculus changes when a transaction moves from the review of a state’s economic agency to the evaluation of a party’s national security organ. At this level, decisions are evaluated through a broader strategic lens that combines economic resilience, technological advancement, and geopolitical competition; narrow legal or economic considerations rarely determine the outcome.
In this particular case, legal justification will be provided through China’s Anti-Monopoly Law, which was first enacted in 2008 and strengthened by amendments in 2022, initially presented as a mechanism to ensure fair market competition. But it is important to know and understand that foreign companies have become, in practice, a flexible instrument of economic statecraft.
Antitrust sanctions have proven to be an effective tool when Beijing wants to shape the outcome of a transaction, signal discontent or slow the advance of foreign rivals in strategic sectors. In 2018, Qualcomm’s $44 billion attempt to buy Dutch semiconductor firm NXP collapsed after Chinese regulators refused to grant antitrust approval even though the deal cleared other major jurisdictions. More recently, Nvidia’s effort to acquire the British chip designer was doomed to failure. Arm Holders It faced regulatory scrutiny in several countries, including China, before collapsing under the weight of geopolitical and competition concerns.
Don’t expect a return to China deals
Antitrust law is just one element of a larger toolkit. Export controls, data security laws, and investment screening mechanisms increasingly function as tools of China’s broader technology-related economic and geopolitical strategy.
Many U.S. companies are eager to return to trading and doing deals in China, especially in the hot innovation sector. A period of what could be described as “opportunistic uncertainty” in Washington may have contributed to complacency regarding deals such as the Meta-Manus transaction. During the Biden administration, the United States has established a relatively clear framework for strategic competition with China. Policies such as the “small garden, high fence” approach have made clear that advanced technologies such as semiconductors and artificial intelligence will be viewed through a national security lens in the United States, just as they are in China.
But today the US approach appears less clearly defined. This uncertainty has encouraged some investors and companies to believe that the era of geopolitics dominating cross-border economic activity is receding. Eager for the return of what markets often describe as “animal spirits,” many have rushed back to deals involving Chinese tech firms. Beijing has shown no such tendency. For China’s leadership, national security remains the organizing principle behind economic, technological and regulatory decisions, especially in the innovation ecosystem.
The implications for multinational technology companies are clear. Deals involving Chinese talent, intellectual property or technological capabilities will not be evaluated on commercial grounds alone. They will be evaluated through the lens of the strategic competition between Washington and Beijing. Corporate transactions in this sector should not be considered routine. There is no such thing as opportunistic uncertainty in China. Beijing still views the world largely through a geopolitical lens. U.S. companies that operate without knowledge or disdain of this fact do so at their own risk.
—With Dewardric McNealLongview Global Managing Director and Senior Policy Analyst and CNBC Contributor
