Beijing Fears AI ‘Brain Drain’ as Meta’s $2B Manus Deal Comes Under Review

While AI is advertised as a tool to simplify everyday life, AI companies operating across borders have not had it easy, amid growing regulatory hurdles.

Beijing authorities are considering whether to intervene in Meta Platforms’ planned acquisition of Manus, an AI start-up with roots in China, due to rising concerns that the deal could breach technology export controls and prompt more Chinese AI companies to move offshore.

According to the South China Morning Post (SCMP), officials, including those at China’s Ministry of Commerce, have begun reviewing the transaction, which was announced late last month and is reportedly valued at between $2 billion and $2.5 billion. Two sources cited by the newspaper said the likelihood of intervention was high, warning that the Manus case could set an uncomfortable precedent for other Chinese AI start-ups seeking overseas capital and exits.

Neither Meta nor Manus has responded publicly to requests for comment, and China’s commerce ministry has not responded to media inquiries.

From Beijing to Singapore

Manus shot to prominence in March last year after launching what it described as the world’s first general AI agent, a software designed to autonomously complete tasks on behalf of its users. The start-up was initially based in Beijing and Wuhan, where much of its early research and development took place. But by mid-2025, it had shifted its core team to Singapore, laid off some China-based staff, and shut down its Chinese social media accounts.

The decision involved laying off some China-based staff and shutting down its Chinese social media accounts, steps widely interpreted as preparing the ground for a foreign acquisition. Singapore has become a popular base for Chinese technology firms seeking to serve global markets, a practice sometimes referred to as “Singapore washing”.

That relocation has become central to Beijing’s concerns. The Financial Times reported that China’s commerce ministry is assessing whether the transfer of Manus’s staff and technology to Singapore, followed by its sale to Meta, required an export licence under Chinese law. While the review is still at an early stage and may not result in a formal investigation, officials could still use the approval process to influence the transaction or, in an extreme scenario, push the parties to abandon it.

Export controls and legal grey areas

China strengthened its technology export control regime in 2020, expanding it to cover certain algorithms. The changes were widely seen as bolstering Beijing’s ability to intervene in sensitive cross-border deals, following Washington’s pressure on ByteDance to divest TikTok’s US operations.

Legal scholars say the Manus case sits in a gray area. Cui Fan, a professor at the University of International Business and Economics and chief expert at the China Society for World Trade Organization Studies, wrote that authorities could intervene to determine “when, in what manner, and which technologies were transferred abroad” by Manus’s onshore entities. He also noted that there has been no confirmation that Manus’s core team relinquished Chinese nationality or ceased to fall under Chinese jurisdiction.

Additionally, Cui noted that Manus’s mainland-registered parent company, Butterfly Effect, remains under the founders’ control, and that early-stage research and development were conducted in China. These factors could strengthen the argument that Chinese regulators still have a say.

Fears of a wider precedent

Beyond all the legal questions, policymakers are concerned about what the deal represents. In recent years, many Chinese technology companies have adopted a strategy known as chuhai, or “going to sea,” by establishing overseas headquarters to access foreign investors and customers.

While most firms retain significant domestic operations, Manus’s near-complete relocation has heightened fears of an AI “brain drain”. One source cited by the Financial Times said the deal had drawn attention in Beijing precisely because it could incentivise other start-ups to relocate abroad to bypass domestic supervision.

At the same time, another source noted that Manus’s product, an AI-powered assistant, is not widely considered core technology vital to China, potentially lowering the need for aggressive intervention.

Market reaction and Meta’s China dilemma

The mere prospect of regulatory pushback has briefly unsettled markets, with investors reacting cautiously. Meta’s shares dipped slightly in premarket trading after reports of China’s review emerged, according to market coverage citing the Financial Times. While the Manus acquisition is a relatively small move for Meta, analysts say any pushback from Beijing could complicate the company’s broader AI strategy.

Meta’s relationship history with China has not been the smoothest. Facebook has been blocked in mainland China since 2009, and although founder Mark Zuckerberg has made repeated efforts to engage with the country, including learning Mandarin and briefly establishing a subsidiary in Hangzhou, Meta’s core products remain inaccessible to Chinese users.

Implications for China’s AI governance

Whether Beijing ultimately intervenes or allows the deal to proceed, the Manus case is turning into a test of how China polices the overseas transfer of domestically developed AI technologies. 

As competition between the US and China over advanced technologies intensifies, the outcome could show just how far Beijing is willing to go to retain control over its AI talent, data, and intellectual property, as the regulatory terrain facing AI start-ups operating across borders becomes increasingly complex.

Also read: Beijing is also pushing state-backed data centres to phase out foreign AI chips in new builds.

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