CHONGQING, CHINA – JANUARY 07: In this photo illustration, the Manus logo is displayed on a smartphone screen, with the Chinese national flag in the background, in Chongqing, China on January 7, 2026.
Cheng Xin | Getty Images News | getty images
When there was a stir in tech circles from Silicon Valley to Shenzhen meta It acquired Chinese-origin Singaporean AI startup Manus for $2 billion late last year.
For Chinese founders attempting to create products that can rival American counterparts, the deal felt like a recognition that a complex offshore structure – known as “Singapore washing”, where companies relocate to the city state – was the answer to avoiding scrutiny from both Beijing and Washington.
Within days, China’s surprise intervention on the deal quickly dashed that hope, as Beijing stepped up efforts to discourage Chinese AI founders from going out of business.
According to one, the Chinese government began a review into whether the sale of Manus violated laws governing technology exports and outbound investment, and barred co-founders Xiao Hong and Ji Yichao from leaving China. Financial Times report Earlier this week.
Founded in China, Manus moved its headquarters and core teams to Singapore last year, allowing it to access a deeper capital pool from foreign investors, including the San Francisco-based one. venture capital firm benchmark. The company wowed Silicon Valley with an AI agent that is capable of building websites and performing basic coding tasks independently.
But that investment has come under fire by lawmakers in the US in mid-2025, who have barred US investors from directly supporting Chinese AI companies.
The Chinese government’s sweeping scrutiny stoked concerns and confusion among a generation of Chinese tech founders and venture capitalists who had quietly adopted the so-called “Singapore-washing” model, prompting consideration of deepening US-China tech rivalry.
The model that no longer works
“The path that Manus has taken: People are not going to go down that path anymore,” said Wayne Shiong, managing partner of Argo Venture Partners, a Silicon Valley-based seed investor in AI.
Xiong told CNBC that more founders are now looking to start outside China from “day one” before doing any meaningful research and development in China, rather than attempting a structural pivot in mid-growth.
“Founders with an eye on global expansion and high valuations will still have the benefit of supporters in the US,” Shiong said. Valuations take place for Chinese AI startups A fraction of their American counterparts.
The Manus deal comes as the US-China rivalry in the AI sector intensifies, and the competition is defined not only by access to advanced chips but also by the flow of talent and technology.
Yuan Cao, a Beijing-based lawyer at Yingke Law Firm, said it was “a red flag for Beijing” for companies to develop technology in China in their early days before “transferring assets to a foreign entity through restructuring.”
In such cases, “where you make your product matters more than where the holding company is registered,” Cao said.
Matthias Hendrix, a Singapore-based consultant to global AI firms, said that “‘Singapore-washing’, or simply setting up a legal entity locally and hiring a handful of local staff, is nowhere near enough.”
“The entire team will need to move, the customer base will need to change, and early Chinese investors will generally need to exit their positions,” Hendrix said.
The Manus deal also served as a warning to tech investors who were betting that offshore structures could protect promising Chinese startups from Beijing’s reach.
Alex Ma, managing partner of Singapore-based family office Alpha Omega Holdings, said Chinese officials will “look at the Singapore aspect and examine the company’s roots, including code, data and talents.”
But Beijing also might not want to “punish success too much because it would discourage founders and distort incentives,” said Ma, who remained positive that companies will continue to find new compliance pathways in the wake of the Manus episode.
What will happen next?
It is unclear what further action the Chinese government will take other than an exit ban on the founders, and whether it will order Meta-Manus to terminate the transaction.
While Beijing was moving forward with its review, the deal was completed in early March with more than 100 Manus employees transferring to Meta’s Singapore office, according to people familiar with the matter.
In an email response to CNBC, a Meta spokesperson said, “The transaction fully complied with applicable law. We look forward to an appropriate resolution of the investigation.” China’s Foreign Ministry, the Chinese Embassy in Singapore and Manus did not respond to requests for comment.
If Beijing were to cancel the deal, it would be “very difficult” for Meta as U.S. tech giants rush to integrate Manus amid intense competition in the space, Hendricks said.
Even for startups that incorporated outside China from the beginning, Beijing’s actions have added another layer of uncertainty to an already opaque regulatory system.
One of the unanswered gray areas was whether outsourcing work to China-based teams is a technology export violation. Outsourcing has been common among overseas Chinese tech founders, for benefits including cost savings and tapping into the country’s deep and affordable tech talent pool.
China’s cyberspace regulator rushed to regulate The field has been growing rapidly in recent years, but is struggling to keep ahead of technology that is advancing faster than the rules designed to govern it.
Alan Wang, co-founder of Singapore-based AI startup Cognitio Labs, said sometimes clarity comes only when an issue becomes prominent enough to attract the government’s attention. The Chinese founder launched the company in Singapore earlier this year after living in the city-state for more than 10 years.
When Wang was asked whether outsourcing to China would be an option for his company, he said simply: “You don’t know until you get big enough.”
