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Concern among China’s leadership with what officials called “selling young crops” spurred a review of Meta’s $2bn purchase of Chinese-founded AI start-up Manus.
China’s commerce ministry kicked off an evaluation of the deal after officials at the highest levels of government demanded an assessment of whether the transaction — a rare example of a US company buying an AI start-up with Chinese roots — would result in the loss of cutting-edge technology and talent, said two people familiar with the discussions.
One of the people said top officials were particularly focused on the danger of “selling young crops”, a euphemism for the cross-border transfer or sale of emerging technologies.
The commerce ministry this month confirmed an FT report that it was reviewing Meta’s acquisition of Manus. Any formal investigation, if launched, could last up to a year.
Manus’s product is an AI assistant that can perform tasks such as market research, coding and data analysis. Meta said in a statement announcing the acquisition last month that it would “operate and sell the Manus service” while integrating the technology into its own products.
The team behind Manus built the AI agent in Beijing and Wuhan but moved to Singapore last summer after receiving a major investment from US venture capital firm Benchmark.
The abrupt exodus drew criticism in China, where media outlets labelled the staff “defectors”. In Washington, national security hawks contended Benchmark flouted rules banning US groups from investing in Chinese AI.
Commerce officials in Beijing held meetings this month with counterparts at the state economic planner and the anti-monopoly regulator to determine if the deal raised outbound investment or antitrust issues under their purview, said the people familiar with the discussions.
The three agencies had different views on the importance of Manus’s technology and move to Singapore, added the people.
The commerce ministry is focused on whether the transaction breaches the country’s technology export controls, which were bolstered five years ago to block Washington’s attempted forced sale of TikTok’s US business.
However, the National Development and Reform Commission, the economic planner spearheading China’s tech drive, declined to intervene when Manus first relocated to Singapore, suggesting it did not view the technology as vital, said one of the people.
The competing views highlight the tension over regulating China’s tech sector, as officials try to balance tighter oversight with encouraging innovation, especially in fast-moving AI. Analysts said forceful regulatory action, such as attempting to order Meta to divest Manus, would risk damping investment.
“Beijing will certainly want to send the message that Chinese-born tech companies must honour certain responsibilities to the state and the Chinese people,” said Linghao Bao, a senior analyst at consultancy Trivium China.
“That said, Beijing also faces a real risk of overplaying its hand. It would make investors even more reluctant to deploy capital, precisely the opposite of what Chinese policymakers have been trying to achieve for years.”
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Venture capital investors told the FT they were closely watching the outcome, as Manus had presented a model for how Chinese start-ups could obtain high valuations from global dealmaking.
“Fundraising [from foreign investors] only started to warm up last year,” said a China-based investor who manages US dollar-denominated funds. “Now investors are being told there could be a ban on this type of deal. Who would dare to go big on China AI investments under uncertainties?”
Another venture capital investor said Beijing’s review was already leading Chinese start-ups to think twice about trying to reincorporate in Singapore as a way to reinvent themselves as non-Chinese companies.
“One lesson learned is to stay as low profile as possible,” the person said.
China’s commerce ministry, the National Development and Reform Commission, the State Administration for Market Regulation, Manus and Meta did not respond to requests for comment.
Contributions from Zijing Wu in Hong Kong and Cheng Leng and Ryan McMorrow in Beijing