China's Ministry of Commerce announced on January 8th that it will investigate Meta's acquisition of AI agent startup Manus for potential export control violations. The deal, announced in late December, was valued between $2 billion and $3 billion.
The investigation centers on a specific question: did Manus need an export license when it relocated its core team and technology from Beijing to Singapore last summer?
The "Singapore washing" problem
Here's what actually happened. Manus started as a product of Butterfly Effect, a Beijing-based startup founded by Xiao Hong in 2022. The company launched an AI assistant called Monica, which reached 10 million users and turned profitable by 2024. Then came Manus in March 2025, an autonomous AI agent that could handle complex tasks without constant human guidance. The company claimed it achieved an annualized average revenue of more than $100 million just eight months after launch.
Things got complicated when US venture firm Benchmark led a $75 million funding round in April 2025. Senator John Cornyn complained about the deal on X, and the US Treasury Department started asking questions about whether American money was flowing into a Chinese AI company without proper authorization.
So the founders did what a growing number of Chinese startups are apparently doing. In May 2025, the three founders and other executives relocated from China to Singapore, where the company set up its new headquarters. By July, Butterfly Effect had shut down its entire China team. The Beijing offices went dark. A Chinese professor on WeChat described it as a "step-by-step disentanglement from China."
This move has apparently become common enough that it has a name: Singapore washing.
Beijing wasn't supposed to have leverage here
A Wall Street Journal article from late December suggested China had "few tools to influence the deal given Manus's foothold in Singapore." Subsequent developments suggest this view underestimated Beijing's regulatory reach.
Ministry of Commerce spokesperson He Yadong said at a briefing on Thursday that the ministry would work with other Chinese regulators to assess whether the deal was consistent with China's regulations on export controls, technology imports and exports, and external investments.
The review is still preliminary. It may not lead to a formal investigation. But if Chinese authorities determine that Manus transferred controlled technology without authorization, the consequences could be serious. A Chinese academic warned online that Manus's founders could face criminal liability.
What they're actually worried about
Beijing's concern isn't just this deal. Officials worry that approval of the Meta-Manus transaction could set a precedent, prompting additional Chinese startups to relocate operations abroad and circumvent domestic regulatory frameworks.
Winston Ma, a professor at NYU School of Law, told the Wall Street Journal that if the deal closes smoothly, "It creates a new path for the young AI startups in China." Relocate to Singapore, get acquired by an American tech giant, bypass all the restrictions.
The timing is awkward for Beijing. China has been tightening its export control regime since 2020, particularly for advanced algorithms, strategic data, and AI technologies. But the rules are still catching up to the realities of how AI companies actually operate. Where is the technology developed? Where does the training data live? Where are the engineers physically located? These questions matter more than where a company is incorporated.
The other side of the table
Meanwhile, some US analysts are framing this as a win. One expert told the Financial Times that the deal shows "the US AI ecosystem is currently more attractive."
The irony here is thick. The same deal prompted scrutiny from both governments, just for opposite reasons. Washington worried about American money funding Chinese AI. Beijing worries about Chinese AI talent and technology defecting to America.
Meta spokesperson Andy Stone confirmed that once the deal closes, no Chinese ownership stakes will remain. The startup will also shut down all services and operations in China. The company will report to Meta COO Javier Olivan, not to the AI research division. That tells you something about how Meta sees this: it's a product acquisition, not a research project.
What Manus actually is
Worth stepping back to explain what Meta bought. Manus is a "general AI agent" that can execute complex tasks autonomously. Unlike chatbots that need constant prompting, Manus can break down a request into steps, write code, access web resources, and interact with applications on its own.
The underlying tech? Manus is built on existing large language models, including Anthropic's Claude and fine-tuned versions of Alibaba's Qwen. Some critics dismissed it as a sophisticated wrapper around open-source tools. The founders disagreed.
Microsoft began testing Manus in Windows 11 PCs in October, allowing users to create websites from local files. The company claimed to have processed over 147 trillion tokens of text and data. The product gained so much attention that invitation codes were reportedly selling for tens of thousands of yuan on Chinese secondary markets.
What happens next
The investigation could take months. Nick Patience, AI lead at The Futurum Group, told CNBC that "the most likely outcome I see is a lengthier approval process and potential conditions around how Manus technology developed in China can be used, rather than an outright block."
But the threat of stricter action gives Beijing bargaining power. China used similar export control mechanisms to intervene in Trump's attempted TikTok ban during his first term. The playbook exists.
Meta completed the acquisition before the review became public. The deal is closed. But that doesn't mean Beijing can't make things complicated for the founders, for the technology transfer, or for how the Manus service operates going forward.
The broader lesson: in the current environment, relocating to Singapore might not be the clean escape it once appeared to be.
