What a difference a week makes. The deal, a rare case of...

What a difference a week makes. The deal, a rare case of US-China tech convergence amid broader narratives of superpower decoupling, was celebrated as a confidence booster for China’s AI entrepreneurs and investors. Manus’ young and idealistic founders showed the possibilities in defying geopolitical considerations in an increasingly fraught environment.   But just a week later, the fairytale story seemed to have unraveled. On Thursday, China’s Ministry of Commerce said it was launching an official investigation into whether the deal might have violated the country’s export controls, foreign investment or technology transfer rules.  Officials were worried that the acquisition could set an “uncomfortable precedent”, in which a leading #🇨🇳 ChinA.I. 🤖🧠🦾🤖 start-up secured a huge US payout by “China-shedding”, or severing ties with their homeland, to reduce political and regulatory risks in light of strict US investment rules.  It’s not like Manus didn’t try its best to do so. Launched just a year ago to great fanfare, Manus made the controversial move to relocate to Singapore last summer. In that process, the firm emptied its Beijing office, pulled its product from the mainland market and even scrubbed its entire Chinese social media presence.  The move seemed to already be paying off. In December, the start-up said that its flagship product, a general-purpose AI agent, had already reached the milestone of US$100 million in annual recurring revenue.  The sense of vindication must have felt even more acute when Meta and its founder Mark Zuckerberg came knocking. In a final coup de grace, Meta told US media that there would be “no continuing Chinese ownership interests in Manus AI” after the acquisition. How naive that seemed now. China still had jurisdiction over Manus’ products and technology, as their research and development most likely took place in China.  Cui Fan, a professor at the University of International Business and Economics and technical adviser to China’s commerce ministry, noted that Manus’ core team are likely still Chinese nationals subject to Chinese laws. Manus’ parent company, Butterfly Effect, remained a mainland-registered firm still under the control of its founders even though they are now based in Singapore. There is a broad list of potential violations for regulators to find. Zhang Yi, founder and chief analyst at market consultancy iiMedia, said there may be cross-border data issues, given the necessity of using large datasets for developing AI products.  You Yunting, an intellectual property senior partner at Shanghai Debund Law Firm, said that antitrust issues were also at play, as Manus could be found to be helping Meta squeeze out its Chinese rivals.  An extreme measure still on the table would be blocking the deal on national security grounds, according to Dai Menghao, a Shanghai-based partner at King & Wood Mallesons, who specialised in export controls and sanctions. Such a move cannot be ruled out as Manus seems to have acted without asking for official permission, potentially touching a nerve among officials now that their technology could be transferred entirely to the US.   As observers now compare the severity of the Manus deal with TikTok’s disputed US sale, Didi Chuxing’s doomed New York initial public offering, and even Hong Kong billionaire Li Ka-shing’s controversial Panama ports sale, Dai pointed out that all of Manus’ previous China-shedding efforts may have, ironically, sealed its fate.  “Manus is actually a good case for the regulators because it's simple,” Dai said. “The company has already declared that it has no connections with China. So even if it goes down now, there won’t be a significant impact on the country.”  https://www.scmp.com/tech..