Beijing’s Veto of Meta’s Manus Deal Signals Shift in the Global AI Race | Big Take Asia

0:01 [music]

0:03 Bloomberg Audio Studios podcasts, radio, news.

0:08 The global AI industry is reeling

0:11 from an announcement made by Beijing that the Chinese

0:14 government is [music] blocking Meta's acquisition

0:16 of an autonomous AI agent startup called Manas,

0:20 a company that had its start in China.

0:22 course China has moved here to block this $2 billion

0:25 acquisition on the part of It was a surprising statement,

0:29 [music] not because the deal was controversial,

0:31 but because it came 4 months after the acquisition was announced.

0:35 Well, everyone really thought of the deal

0:38 as being done because it had happened months ago.

0:41 Newly Purnell covers Asia tech for Bloomberg [music] out of Hong Kong.

0:45 He says in the past it was common for Chinese startups looking

0:49 for access to global [music] funding to move their operations out of China.

0:53 Business-friendly Singapore has been a preferred destination.

0:57 By the time Meta's buyout was announced, Manas had made that move.

1:01 An integration of Meta and Manas has been underway for months now.

1:05 Most, [music] if not all,

1:07 we believe of Manas's employees had moved from the mainland to Singapore.

1:12 Manas's staff had been integrated into Meta.

1:16 We assume the technology had been as well since it's been so long.

1:19 [music] And then all of a sudden, you have Beijing saying, "Actually, no.

1:23 Can't do it." The question now really is, "What does that mean?

1:27 Can they unwind it?" Beijing hasn't offered more details,

1:33 but the announcement sent a clear message.

1:36 Just like the US, China is prepared to act aggressively

1:40 to secure key technologies and prevent them [music] from going overseas.

1:45 Manas hasn't responded to Beijing's statement.

1:47 On an earnings call last week,

1:49 Meta's CFO Susan Li was asked about the [music] announcement and said,

1:53 Um on Manas, we're still working through the details,

1:56 so we don't have an update um right now.

2:00 [music] A few months ago, Manas was a viral tech sensation.

2:03 Today, it's a potential geopolitical flashpoint.

2:06 [music] The idea that China wants to try to reverse

2:09 an acquisition that was assumed to have been completed [music] is startling.

2:15 Lulu Chen, Bloomberg's managing editor for Asia finance,

2:18 says the bigger story here is what

2:21 this episode could mean for China's broader startup community.

2:26 When I talked to investors and some entrepreneurs,

2:29 essentially what people are saying is

2:31 that this method or this template that Manas created,

2:34 which is to base your company out

2:36 of Singapore and seek that route to become international,

2:40 Singapore washing is dead.

2:49 [music] This is the Big Tech Asia from Bloomberg News.

2:54 I'm Wan Wa.

2:56 Every week we take [music] you inside some

2:57 of the world's biggest and most powerful economies and the markets,

3:01 tycoons, and businesses that drive [music] this ever-shifting region.

3:05 Today on the show, the Manas madness.

3:09 How do you unscramble a $2 billion deal?

3:12 And is this the end of the road

3:13 for Chinese entrepreneurs [music] looking for a global exit?

3:24 In January of last year, Deep Seek's debut rattled global markets.

3:29 The Chinese chatbot challenged investor assumptions

3:32 about the cost of building large language

3:35 models and wiped almost a trillion dollars off valuations of US tech stocks.

3:40 The AI arms race had a new low-cost frontrunner.

3:44 And while the markets were still reeling from the Deep Seek shockwave,

3:47 another Chinese AI quietly surfaced on YouTube.

3:52 Hi, I'm P from Manas AI.

3:53 For the past year, we've been quietly building

3:54 what we believe is the next evolution in AI.

3:57 And today, we're launching an early preview of Manas,

3:59 the first general AI agent.

4:02 G Yichao, who goes by the nickname P, is one of the co-founders of Manas.

4:07 In the video, he introduces Manas and promises something different,

4:11 an AI that can act on your behalf, not just answer your prompts.

4:16 When you think about what LLMs do, so a chatbot,

4:19 you type in text, it gives it back.

4:21 Okay, that's great.

4:22 That's Bloomberg Asia tech reporter Newly Purnell.

4:25 But what's really interesting about Manas and and this new

4:27 phase that tech leaders are talking about of agentic

4:30 AI is what Manas can do is actually go

4:33 out into the internet world and do things for you, the way an assistant might.

4:38 Manas was founded in 2022 [music] by a group

4:41 of young Chinese entrepreneurs with offices in Wuhan and Beijing.

4:45 From the beginning, Manas adopted a culture

4:48 that followed classic Silicon Valley [music] startups.

4:51 One of our colleagues saw a sign in the office that said,

4:55 uh essentially, the mentality of let's [music] make stuff happen.

4:59 Let's think big picture.

5:00 Let's get stuff done, move fast.

5:03 So, very much that that Silicon Valley style of um mavericks.

5:07 [music] You be a cowboy.

5:09 Like the idea that you have to just go out there and get stuff done and be bold.

5:13 By mid-2025, Manas had followed a growing

5:17 trend among Chinese [music] startups, leaving China.

5:21 It relocated its headquarters to Singapore

5:23 and shed most of its China-based staff.

5:26 It is a path that other startups have done before.

5:29 Singapore washing [music] is the term.

5:31 So, the idea is we can become an AI company for the world,

5:35 not just to remain in [music] China and serve the admittedly large China market,

5:40 but we can go abroad to Singapore, access international capital,

5:45 be seen as a Singapore-based company,

5:47 [music] and more easily tap global users and international money.

5:53 And it wasn't long before Manas started drawing

5:56 attention from the biggest players in Silicon Valley.

5:59 One of the early investors in Manas said that Mark Zuckerberg

6:03 himself had been a very early and enthusiastic user of Manas.

6:08 So, it it caught caught the attention of uh some

6:11 very powerful people in Silicon Valley not long after its emergence.

6:14 Now, we did an episode on how Open Claw has generated a lot of attention

6:19 in China and there's a lot of hope for that when it comes to agentic AI.

6:23 How is [clears throat] Manas different from from Open

6:25 Claw and others that are out there?

6:27 A couple things.

6:28 One, Manas is meant to be more autonomous.

6:30 So, it's meant to operate with less oversight.

6:34 You tell it what to do and it can essentially go out and do things.

6:38 The other, which was immediately apparent to me when I used it,

6:41 is how user-friendly it is and how polished it feels.

6:45 So, unlike some of these tools that you kind of feel like,

6:47 "Oh, am I Do I need to like learn how to write code?

6:49 Or what do these buttons do?

6:50 What are" It's very simple.

6:52 It's just a a very simple website and app

6:54 that almost looks like Google or like a chatbot.

6:57 You just enter things and ask it to do it.

6:58 Very clean interface.

7:00 It felt very polished.

7:01 So, so autonomous and and user-friendly,

7:04 I would say, are are two distinguishing features.

7:07 Meta's Mark Zuckerberg was so enamored of Manas that he decided to buy it.

7:13 Meta announced the acquisition last December.

7:16 Now, normally, that would be the end of the story,

7:18 but almost immediately, [music] China raised a red flag.

7:22 Beijing announced an inquiry into the deal in January.

7:25 That resulted in last week's demand that the deal be canceled.

7:30 What stunned the tech world [music] was Beijing

7:32 effectively claiming jurisdiction over Manas under Chinese law,

7:37 even though the company had moved its headquarters to Singapore.

7:40 The announcement came in recent days,

7:42 providing [music] little detail from Beijing, just a very simple,

7:47 essentially one-sentence statement saying [music]

7:49 that the government would not allow foreign

7:54 investment into the startup [music] and that was due to rules and regulations.

8:00 It didn't say anything beyond that.

8:01 I mean, are there any actions that Beijing

8:03 can realistically take [music] at this point?

8:06 Yeah, it's an interesting point.

8:08 We understand that two of the founders were asked

8:10 to return to the mainland and [music] are there.

8:13 And so, Beijing can restrict the movement, but again,

8:18 the technology would appear to have already been absorbed by Meta.

8:22 Some people have raised the issue of, "Well, okay,

8:24 if you force the deal to be unwound and you say to Manas,

8:27 you have to give the money back to Meta."

8:29 If Meta has already incorporated all of the sophisticated technology,

8:32 essentially they've gotten it for free.

8:34 Beijing's claim that it has jurisdiction over the Manas-Meta

8:38 acquisition plunges the deal into a legal gray area.

8:42 And just as important,

8:44 the news that Manas's founders are reportedly barred from leaving

8:47 China sent a chill through the country's tech sector.

8:52 After the break, what Beijing's new assertiveness [music] means for Chinese

8:56 startups and the foreign investors who want a piece of them.

9:14 For most of the last two decades,

9:16 Chinese tech companies have grown using a simple formula.

9:20 Chinese talent plus American venture capital equals global dominance.

9:26 Here's Lulu Chen, Bloomberg's managing editor for Asia finance.

9:30 China's first generation of technology companies,

9:34 think about Sohu, Baidu, Alibaba, even Didi, these companies,

9:39 they all followed this money trail or benefited

9:43 from this money trail and US investors,

9:46 indirectly through the pensions and endowments

9:49 that invested in these tech firms, also made huge returns.

9:55 It used to be that if a Chinese founder got a check from a top US fund,

10:00 it was a stamp of approval.

10:03 But that changed about a decade ago, Lulu says,

10:05 right about when President Donald Trump

10:07 took [music] office the first time around.

10:10 That's when his administration began using CFIUS,

10:13 short for the Committee on Foreign Investment in the US,

10:16 to put pressure on China.

10:18 When geopolitical tensions started escalating,

10:22 in the US you have this thing called CFIUS,

10:24 and that's where foreign money investing in core US assets get vetted, right?

10:31 But during Trump's first term, people started asking questions like why are

10:36 why are people channeling this pool of money

10:38 to funding technology in China and ensuring

10:43 the survival and success of Chinese companies.

10:47 And so that became, you know,

10:49 the the origins of what is now known as reverse CFIUS.

10:52 And it came into effect a few years ago.

10:56 So right now, anything that is related

10:59 to investment in AI and advanced semiconductors,

11:05 these are areas that US pensions, for example,

11:09 would not be allowed to invest in.

11:11 Now Lulu, you've covered tech for a lot of years.

11:15 Here we've got a situation where Chinese regulators

11:17 are blocking the Manas Meta deal after the fact.

11:21 What surprised you most about this latest development?

11:24 I think what's most shocking for investors is how

11:28 fast the deal turned from a celebration of Chinese entrepreneurship,

11:34 global acceptance of Chinese AI technology development into a case

11:41 where entrepreneurs and investors are almost back at ground zero again,

11:46 where the importance of geopolitical conflicts and also the optics

11:52 of how deals are done has become so much more important.

11:56 And it sends a chilling effect to Chinese entrepreneurs who

12:02 want to take the same kind of route that Manas did.

12:05 It also completely remaps how Chinese entrepreneurs think about

12:11 when they have aspirations to expand their businesses globally.

12:17 Now, how do you think this Manas episode changes the way that [music] VCs work,

12:23 you know, on the ground in China, but as well as VCs from the US?

12:27 You [music] know, are there at this point options

12:29 for American companies that still want to invest in China?

12:33 [music] Yeah, there's still options.

12:34 One of the structures that is becoming increasingly

12:37 popular right now is a so-called parallel structure.

12:41 So if US investors, this would be like pensions, endowments,

12:47 institutional LPs, if they still want to gain exposure to China,

12:53 they can go in and invest in companies that are non-sensitive together,

12:57 for example, consumer industries.

13:00 And then for any sensitive company like advanced AI,

13:05 the US investors would opt out.

13:07 The reason it's appealing is it just lessens the reporting burden

13:10 for these US investors and structurally

13:14 it's clean for, you know, the separation.

13:19 Mhm.

13:20 So does that mean then that American investors

13:23 and American money are completely out of AI then?

13:27 So they can invest in semiconductors that are not cutting edge.

13:32 They would still have to report that.

13:35 If it's advanced chips, then yeah, cannot.

13:39 AI, advanced AI, no, they cannot.

13:41 But if it's consumer AI, something for example,

13:45 you're using AI as a marketing, that's not considered advanced AI.

13:49 And you know, those companies might still be able to, you know,

13:53 fall into that area where that is permissible.

13:56 And how viable do you think is this parallel structure of of investing?

14:00 Can you still make a lot of money?

14:02 Is it still worth it?

14:03 Mhm.

14:05 Well, if your goal is to invest in the next

14:07 trillion-dollar company that's going to be dominant in the AI era,

14:12 then no, this is not, right?

14:13 This would be for people who for institutions

14:17 who still believe in China growth and want

14:19 exposure to that, but you're not going to be investing in the next like OpenAI.

14:25 And what about now?

14:26 Does China tech even need US money now?

14:29 So right now, China has a lot of yuan funds.

14:32 A huge part of it is

14:33 government-driven local government vehicles that provide financing.

14:39 There's pros and cons for taking money from the government.

14:42 Some of it could include that you have to implicitly guarantee returns.

14:49 There's a lot of baggage that comes with taking money from these investors.

14:55 But, you know, it has created this parallel

14:58 system where there are companies that only

15:01 take money from yuan funds and they still make it to IPO to listing stage.

15:08 Now Lulu, we've seen Beijing flex [music] its muscles before.

15:12 In 2020, they pulled the plug on Ant Group's IPO.

15:15 [music] In the following year,

15:16 they effectively forced Didi right off the New York Stock Exchange.

15:20 And you reported on both both of those developments in depth.

15:24 Does this Manas intervention fit into that pattern somehow?

15:28 It fits into the pattern of the Chinese government

15:31 seeking more control over its national champions in tech.

15:36 And in this case, even though Manas relocated to Singapore,

15:39 they still see it as [music] a Chinese company.

15:42 Where it's slightly different, I would say, is that with Ant,

15:47 it was more about the guarding

15:50 of the financial system's rails and financial [music] stability.

15:56 With Manas, it falls in more

15:58 into the geopolitical conflict with the US category.

16:04 Lulu says, at this point,

16:06 what matters most isn't whether the deal would be unwound and how.

16:11 It's that Beijing's statement is an important symbolic [music] message.

16:15 To me, what's more important is sending a message to other

16:18 people who want to take the same route as Manas.

16:20 That's that's actually more important.

16:23 Because for the deal itself, a lot of it has been already done.

16:27 Maybe some of the money that Meta paid can be recouped,

16:32 but I would say the more important thing here is the message

16:37 that they're sending to everyone else who's thinking of doing the same thing.

16:41 And the message is?

16:42 Don't follow the Singapore-Washington path.

16:45 And any thoughts on in terms of how you think

16:48 this might heat up the AI race between the US and China?

16:52 It's accurate to say we are in a pivotal moment in the AI race at this moment.

16:57 You're seeing the LLMs right now going through

17:01 the second iterations or generations of becoming even more advanced.

17:06 And right now, the estimates are anywhere from like

17:11 a few months to maybe one to two years, the gap between China and the US.

17:17 And in some areas, China might be even more advanced like the consumer AI front.

17:21 That's why we're seeing so much focus [music] on how money

17:27 flow and also how technology is shaping the industry in both countries.

17:33 And probably with a lot more to come, I imagine, in terms of these tensions.

17:37 Yeah.

17:43 [music] This is the Big Take Asia from Bloomberg News.

17:47 I'm Wan Hua.

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