Meta’s $2 billion acquisition of AI assistant platform Manus is unsurprisingly caught in a regulatory tug-of-war — but not because of U.S. regulators. They appear assured that the deal is legitimate despite earlier misgivings about Benchmark’s investment in Manus. China’s regulators, however, are reportedly not quite as sanguine, according to the Financial Times.

When Benchmark led a financing round for Manus earlier this year, the investment sparked immediate controversy. U.S. Senator John Cornyn complained about the deal on X, and the investment prompted inquiries from the U.S. Treasury Department around new rules restricting American investment in Chinese AI companies.

The concerns were significant enough to spur Manus’s eventual relocation from Beijing to Singapore — part of what drove the company’s “step-by-step disentanglement from China,” as one Chinese professor described it on WeChat this past weekend.

Now the tables have turned. Chinese officials are reportedly reviewing whether the Meta deal violates technology export controls, potentially giving Beijing leverage it wasn’t initially perceived as having. Specifically, they’re examining whether Manus needed an export license when it relocated its core team from China to Singapore — a move that’s apparently now so common it has earned the nickname “Singapore washing.” A recent Wall Street Journal article speculated that China has “few tools to influence the deal given Manus’s foothold in Singapore,” but that assessment may have been premature.

The concern in Beijing is that this deal could encourage more Chinese startups to physically relocate to dodge domestic oversight. Winston Ma, a professor at New York University School of Law and partner at Dragon Capital, told the Journal that if the deal closes smoothly, “It creates a new path for the young AI startups in China.”

History suggests Beijing could act. China previously used similar export control mechanisms to intervene in Trump’s attempted TikTok ban during his first term. The Chinese professor even warned on WeChat that Manus’ founders could face criminal liability if they exported restricted technology without authorization.

Meanwhile, some U.S. analysts are calling the acquisition a win for Washington’s investment restrictions, arguing it shows Chinese AI talent is defecting to the American ecosystem. One expert told the FT that the deal demonstrates “the US AI ecosystem is currently more attractive.”

It’s too early to know if this impacts Meta’s plans to integrate Manus’s AI agent software into its products, but this $2 billion deal may have gotten more complicated than anyone anticipated.