Meta announced on December 29 that it has acquired the Chinese artificial intelligence (AI) startup company Manus (Butterfly Effect) based in Singapore, sparking widespread discussions due to Manus actively seeking to separate from China and engage in the global market. Experts say that this event indicates that the competition between the US and China in AI has shifted from upstream to the application end, with Manus’ departure effect also impacting China’s new tech startup ecosystem.
Manus is a company focusing on AI agents, a next stage in AI development that many tech giants including Google see as crucial. Taiwan’s National Security Institute assistant researcher Yang Yikui told Epoch Times that Manus is not positioned in the upstream large language model led by the US but rather in the downstream application and execution end, which is currently the most attention-grabbing battleground in the AI industry.
He explained that while traditional large language models can analyze prices, times, and layover options of various airlines to provide cost-effective recommendations when booking a flight, the AI agent goes beyond mere suggestions and directly assists in completing the booking process after analysis.
From the perspective of regular users, what they truly need are AI agents that can handle daily administrative tasks and highly repetitive work. Manus targets this commercially viable application layer that aligns closely with real-world needs.
Yang believes that Meta’s acquisition of Manus signifies the US not only aiming to maintain superiority in the upstream supply chain but also actively investing resources in the application end and market scalability.
He stated, “Chinese AI companies with promising future prospects will face acquisitions by American companies.”
The development of the AI industry in mainland China faces various constraints, including data regulation, chip embargoes, firewall restrictions, speech control, and industry consolidation, making global expansion a top choice for many AI entrepreneurs.
However, amid the US-China competition dynamics, developing AI products for both the Chinese and global markets simultaneously is becoming increasingly impractical, prompting a choice between the two.
Yang emphasized that Meta’s acquisition of Manus particularly underscores the need to minimize Chinese ties and risks, with Meta seeking talent and intellectual property rather than the risks associated with connections to China’s supply chain and Beijing government.
He further outlined three major concerns regarding Chinese supply chains and technology in the international industry: the risk of technology, data, and process leakage by aligning with China; the potential replacement by similar Chinese suppliers if technology leaks occur; and the challenges Western companies face in market competition due to Beijing government subsidies and interventions.
“All of the above factors present challenges for Western companies cooperating with Chinese companies or Chinese new startups attempting to enter the global market, which is why Manus proactively pursued de-Chinalization,” Yang stated.
Regarding the future prospects of Chinese new AI startups, proactive de-emphasis on Chinese links and implementation of “de-Chinalization” in corporate governance and operational layout at geographical and regulatory levels will be key strategies for advancing to higher growth levels, according to Yang.
He added, “The Manus case will become a precedent for Chinese new startups seeking higher development in the future.”
The de-Chinalization of Manus leading to its acquisition by Meta has sparked significant discussions.
Some industry insiders believe that Manus breaking away challenges domestic entrepreneurs while also offering new hope. Amid intense internal competition and ever-changing policy environments, coupled with declining attractiveness of user payments, completely leaving the mainland to earn US dollars and attract overseas investments has become the mainstream choice.
Some netizens commented, “The biggest secret to Manus’ success was actually running away.” “The lesson Manus offers to domestic entrepreneurs is: Run away quickly.”
Professor Henry Gao from Singapore Management University commented on the acquisition on platform X, stating that Meta’s acquisition of Manus sends a clear signal that only by completely severing ties with mainland China can Chinese companies obtain genuine capital, talent, and global scale.
He wrote, “A wave of departures is about to come.”
Yang noted that this case poses a more severe challenge for China than previous restrictions on technology exports. For new Chinese AI companies to be accepted in Western ecosystems, they must transition their technology, talent, business models, and equity relationships to the US or other Western countries, impacting the overall tech startup ecosystem in China.
He stated that top Chinese startups will seek to leave, but many will stay in the Chinese market for profits, indicating that future AI competition will be a fragmented market.
Manus is not the first Chinese AI startup team headquartered overseas, as in 2022, the AI video generation tool platform HeyGen relocated its headquarters from Shenzhen to Los Angeles.
In May 2023, Financial Times reported that over the past year, as many as 500 Chinese companies quietly re-registered or registered in Southeast Asian countries to avoid the escalating geopolitical risks between Beijing and Washington. Companies such as fast-fashion retailer Shein, electric vehicle manufacturer Nio, and IT service provider Cue have hired more local executives to appear less like Chinese companies.
These Chinese firms emphasize their global backgrounds, with TikTok notably defending itself as not a Chinese company.
While Chinese companies going abroad downplay their ties with China, legal concerns still persist. China’s 2017 National Intelligence Law requires organizations and individuals to unconditionally cooperate with the government in intelligence work and keep secrets.
Yang explained that the US has various departments managing risks, primarily focusing on protecting intellectual property, sensitive technology exports, and investments.
He pointed out that the Committee on Foreign Investment in the United States (CFIUS) has undertaken many upgraded defense measures specifically targeting China in recent years. Whenever a US company acquires an entity with Chinese connections, CFIUS may intervene and oversee the deal, examining if the transaction or cooperation could lead to technology transfer, involve Chinese ownership shares, or look into board seats and personnel backgrounds in addition to scrutinizing extra contract relationships. If sensitive technology is involved, CFIUS may even demand restrictions on Chinese personnel accessing key intellectual property and establish monitoring systems to isolate critical technology.
Yang stated that the US Department of Commerce’s Bureau of Industry and Security conducts export reviews for companies post-merger or acquisition, examining if technology that could assist China in military capabilities, strengthen “Made in China 2025,” or includes technology violating human rights may be exported or leaked to Chinese firms. The US Treasury Department also reviews post-merger companies’ foreign investments, penalizing and pursuing criminal charges against those investing in Chinese semiconductor, quantum computing, digital surveillance, and military AI technologies.
Regarding the Meta-Manus case, Yang highlighted that Meta must ensure that Manus does not allow Chinese infiltration and that its prior operations or investments in China do not lead to Meta indirectly transferring, exporting, or investing critical capital and technology to China.
“This is why Manus needed to proactively de-Chinalize to complete the collaboration with Meta.”