China initiates regulatory probe into Meta's Manus acquisition

China has announced an investigation into Meta’s recent acquisition of the artificial intelligence startup Manus, signaling a heightened focus on technology transfers amidst ongoing tensions between Beijing and Washington. The Chinese Commerce Ministry confirmed the regulatory probe, which will assess whether the deal complies with China’s laws and regulations.

Meta, the California-based parent company of Facebook and Instagram, revealed last week that it was purchasing Manus, a Singapore-based AI firm with Chinese origins. The move comes as Meta seeks to expand its AI capabilities, but the acquisition has drawn scrutiny due to Manus’ historical ties to Beijing-registered entities.

Chinese scrutiny on cross-border acquisitions

On Thursday, He Yadong, a spokesperson for China’s Commerce Ministry, stated that the government would evaluate the transaction in collaboration with relevant departments. "Any enterprises engaging in outward investment, technology export, data transfer and cross-border mergers and acquisitions must comply with Chinese laws", He said.

The acquisition has raised concerns among Chinese regulators and experts over potential technology exports. Cui Fan, a professor at the University of International Business and Economics in Beijing, questioned whether the deal adheres to Chinese export controls. "A key question is whether any technologies prohibited or restricted from export under Chinese laws and regulations are exported without a license", Cui wrote on WeChat.

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Manus' roots and business operations

Although Manus is headquartered in Singapore under Butterfly Effect Pte, its origins trace back to Chinese entities that were founded several years ago. According to Manus, most of its current employees are now based in Singapore, and the company reported an annual recurring revenue exceeding $100 million last month.

Meta clarified that there would be "no continuing Chinese ownership interests in Manus AI" following the acquisition and stated that Manus would discontinue its services and operations in China. Notably, Meta’s platforms, including Facebook and Instagram, remain banned in China due to the country’s "Great Firewall."

Security concerns dominate policymaking

The probe underscores China's growing emphasis on regulating technology transfers amid its strategic competition with the U.S. Gary Ng, a senior economist for Asia Pacific at investment bank Natixis, explained the significance of such scrutiny. "Security has become the top concern for Chinese policymakers", Ng said. "Any tech transfer that could give the U.S. an edge in competitiveness will be heavily scrutinized."

Manus has developed a "general-purpose" AI agent capable of autonomously performing multi-step tasks, with both free and paid subscription packages available. The technology’s advanced capabilities have likely contributed to the regulatory concerns surrounding the acquisition.

As the investigation unfolds, both Meta and Manus have declined to comment on the matter. For now, the acquisition’s future remains uncertain as Chinese regulators delve deeper into the transaction’s compliance with local laws.

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