The ties that bind

The Manus founders, Xiao Hong and Ji Yichao, have already relocated most of their team from China to Meta’s Singapore office and have taken pains to cut any lingering Chinese ties in the lead-up to the Meta acquisition late last year—even turning down Chinese authorities’ requests for meetings or investment, according to The Wire China. They paved the way for the move to Singapore by registering the firm Butterfly Effect Pte and setting up Butterfly Effect Holding as a parent company based in the Cayman Islands.

Now, the Chinese government’s decision to quash the deal creates significant uncertainty for both Manus and Meta’s future AI ambitions. For example, Manus may not be able to continue deploying its AI agent service using Anthropic’s Claude models, given that Anthropic has restricted AI sales to entities in China. “If Manus had remained a Chinese company, its core product would have disappeared,” said Chris McGuire, a former national security official with the Biden administration who designed US restrictions on tech exports and investments relating to China, in an interview with The Wire China.

The unwinding of the deal would also represent a setback to Meta’s pivot to AI, which comes after the US tech company spent $80 billion over half a decade in an attempt to make the metaverse catch on with consumers. Beyond incorporating the Manus AI agent into its own services, Meta has “deeply integrated” the Manus team with Meta’s own teams in the Singapore office, according to The New York Times.

What is clearer is that Chinese tech founders face dim prospects when trying to pivot from being a homegrown Chinese company to the US tech scene. The apparent failure in this case of the “Singapore-washing” model, frequently used by Chinese tech founders attempting to reestablish their company outside of China, suggests that founders will need to think about setting up shop outside China from “day one,” said Wayne Shiong, managing partner of the Silicon Valley seed investment firm Argo Venture Partners, in a CNBC interview.