Can China reverse a billion-dollar tech deal? - Asia Specific podcast, BBC World Service

0:00 Recently, something extraordinary happened in the tech world,

0:03 something we haven't seen before.

0:05 The Chinese government demanding that a two billion US dollar deal

0:09 for an American company to buy a Chinese AI service be reversed.

0:14 Now, that American company is Meta.

0:16 Mark Zuckerberg's Meta, which owns Facebook,

0:19 Instagram and WhatsApp, and the Chinese AI firm Manus.

0:23 It's actually a Singaporean based firm,

0:25 which created quite a lot of buzz because of its AI agent tools.

0:30 So why did Beijing block it,

0:32 and what does it mean for the battle to dominate artificial intelligence?

0:38 As always, I'm Mariko in Singapore and this is

0:41 Asia Specific from the BBC World Service,

0:44 the podcast that unpacks Asia Pacific stories

0:46 with those who know them inside out.

0:49 And today I have Rui Ma, founder of the Tech Buzz China Newsletter,

0:53 which is a real go to source for people in the US China tech space.

0:58 I also have Wendy Chang,

1:01 a senior analyst at the Mercator Institute for China Studies,

1:04 a German based research institute.

1:06 Welcome both to Asia Specific.

1:09 Thanks for having me.

1:10 Happy to be here.

1:11 So, Rui, the US and China compete in practically everything,

1:16 especially when it comes to tech.

1:18 But this company Manus seems to have been a rare instance

1:23 of cooperation where American and Chinese companies agree to a deal.

1:27 So can you just talk us through why Meta wanted to buy Manus in the first place?

1:34 What made it so special?

1:35 Basically, it was one of the breakouts in terms

1:39 of this whole agentic AI wave that we're seeing right now.

1:44 And it was one of the earlier ones.

1:46 Right now we have Open Claw and other different harnesses,

1:51 but Manus was really kind of the first

1:54 consumer grade ready for prime time use applications,

2:00 and it was unique in that it came out of China.

2:03 It came out sort of right after DeepSeek made waves.

2:07 And that was also one of the reasons why it got a lot of people's attention,

2:11 because people saw it as a, wow, this other innovation coming out of Chinese AI

2:18 that has thus far been always behind us.

2:23 Specifically for Meta, there are many reasons, right?

2:27 Meta also explains why it decided to acquire Manus,

2:31 but one of the main reasons that we can see is that Meta

2:34 in the past couple years has been sort of reshuffling its overall AI strategy.

2:40 It has, you know, hired completely new staff,

2:43 decided right to kind of re-institute a whole new strategy.

2:49 And one of them includes really going all in on this application layer.

2:55 And Manus is a very sophisticated team that is full of talent,

3:01 that has proven that it has the ability

3:05 to deliver a globally recognised application in AI.

3:10 But this deal with Meta, it was a done deal, wasn't it?

3:13 Because Manus moved to Singapore last year,

3:16 its staff relocating to the city state.

3:18 Then Meta agreed to buy it for $2 billion.

3:22 But then Beijing came out and said that the deal violated its regulations,

3:27 in particular the export of key critical technology.

3:31 And it's about national security.

3:34 And in response, the Meta spokesperson has

3:36 told the BBC that the transaction complied

3:39 fully with applicable law and that they

3:42 anticipate an appropriate resolution to the inquiry.

3:45 But they also then went on to say that the team

3:48 at Manus is now deeply integrated into Meta running,

3:51 improving and growing the Manus service.

3:54 So is it possible to undo this deal, and if so, how?

3:59 Is it possible?

4:00 I think it's more maybe on the legal side and it's

4:04 up to the commerce on both sides what they decide to do.

4:09 But I think more than anything, this deal is really symbolic,

4:12 or rather, Beijing's move is really symbolic.

4:15 It wants to make it very clear, especially to its own tech ecosystem,

4:20 which is full of tech talent, AI talent,

4:23 that a maneuver like this, without the approval of the government

4:28 is not going to be permitted from now on.

4:32 Especially when it comes to AI talent,

4:34 which is very key to the country's AI competition with the US.

4:39 Rui, is it possible technically?

4:41 Like how would they undo this deal if Meta says

4:45 that those staff are already fully integrated into Meta's ecosystem?

4:49 Yeah.

4:49 Again, I agree with Wendy.

4:50 It'll have to be up to the regulators

4:52 to clearly define what they mean by unwinding.

4:56 The Chinese government themselves constantly refer

4:59 to the fact that there are global precedents, including, you know,

5:03 US side unwinding Chinese acquisitions of US tech companies,

5:09 the most famous one being Grindr or the gay

5:12 dating app that where the acquisition was unwound,

5:16 I think over a year after it was closed.

5:19 With talent, I think it's easier with IP and, you know,

5:25 I guess software that's already been injected,

5:28 let's call it into the Meta ecosystem or into the source code.

5:33 There are still ways to unwind it,

5:36 but I guess the question I think here is, is that really what's most important?

5:42 And I would argue it's really not because as you know,

5:46 as I believe, as many technology analysts also believe,

5:50 the sophistication of the technology that was acquired is

5:54 really not the most important aspect of this deal.

5:58 This really is a deterrent to future deals like

6:02 this being completed without the Chinese government having a say.

6:09 I'm just wondering about the Singapore factor

6:11 because Manus moved to Singapore last year.

6:14 It's incorporated here and Singapore has somewhat

6:17 become a go to place for Chinese

6:19 tech companies trying to navigate these geopolitical

6:22 tensions between the US and China.

6:25 But how, why does Beijing still have a say legally

6:29 in this deal if the company was already incorporated in Singapore, Wendy?

6:33 I think the idea is that part of what Beijing is going

6:37 after right now is retroactively looking at Manus's move to Singapore last year,

6:42 and whether that move had met all the rules,

6:47 especially when it comes to export control of critical technology.

6:52 Either that or maybe the export of key IP.

6:55 There's also an argument that AI technology may

6:59 have been trained on the data of Chinese nationals,

7:02 and China has very strict rules about cross-border data transfer.

7:08 And so that may become another thing that's worth scrutinising.

7:11 And Chinese authorities may go from those details to argue

7:17 that the move across borders to Singapore was illegal in the first place.

7:23 And of course, it still has jurisdiction

7:25 over the Chinese nationals who are its employees.

7:28 So that's going to be another big leverage that they have.

7:31 So how did Singapore become this go to place, right?

7:34 Because we have ByteDance as well, the owner of TikTok being headquartered here.

7:40 What's so attractive about Singapore and what

7:42 does this block of Meta Manus deal,

7:46 how could this impact Singapore's position in your view?

7:49 You know, I think Singapore will remain attractive

7:52 as a global outpost for Chinese companies looking to go overseas.

7:57 And Singapore's attractiveness is because it is

8:01 considered sort of a relatively neutral, you know,

8:05 geopolitically de-risked region where you you still are

8:09 pretty close to China in terms of the distance.

8:12 And you can move key talent over relatively easily.

8:17 There is good policy to support that, but also culturally.

8:21 That being said, the Chinese government largely is sort

8:26 of, I think what they're trying to assert here

8:29 is not that you can't operate in Singapore or maybe

8:32 even put your global headquarters there, as ByteDance has.

8:36 It's that, again, you do it with, you know, sort of our consent and permission.

8:41 But that also, I think what really upset and by the way,

8:45 not just the government,

8:46 you can see this very visibly in public discourse is that for the Manus team,

8:52 they made this decision, while rational at the time,

8:55 kind of hurt the feelings of, I think

8:58 the government and the people where they removed,

9:02 you know, their Chinese operations.

9:04 So when they you know, shut down basically their domestic Chinese offices

9:12 and relocated or laid off their Chinese workers,

9:16 that was kind of taken in a very

9:20 different way from ByteDance or Shein or these many,

9:23 many, many other companies having Singaporean regional or global headquarters.

9:29 You were both talking about the message, I guess,

9:32 that Beijing is trying to send by blocking this deal.

9:35 And reportedly, the CEO and the chief

9:38 scientist of Manus were barred from leaving China.

9:42 So what's been the reaction from the tech community

9:46 to this news that Beijing wants this deal undone?

9:49 I want both of your opinion, but let's start with you, Wendy.

9:52 I think the message is loud and clear.

9:55 Going forward, if you're a tech company,

9:57 especially if you're AI and extra double,

10:00 especially if you're an AI company that's received a lot of attention,

10:05 so to raise points earlier, exactly,

10:08 because it was so much reported on domestically inside China

10:14 as the next rising star right after DeepSeek's huge success that China,

10:18 in a way, had to react to the fact that they up and moved across to Singapore.

10:24 So that's one part of it.

10:26 But I think it's really about the critical technology.

10:30 It's about the AI competition because as we know,

10:34 there's a lot of cross border talent in AI.

10:35 There are a lot of Chinese born,

10:39 AI educated people who then go and work in Silicon Valley or vice versa,

10:45 moving back and forth.

10:46 And China, I think with this move, really wants to make a point that, okay,

10:53 if you are part of the Chinese team,

10:55 if you will, if you're homegrown talent, then stay here.

11:00 So I think this really sends a message to, specifically to, I think,

11:06 AI talent or to other critical technology,

11:09 perhaps that while seeking funding overseas in Singapore is usually permitted.

11:18 But if you're in critical tech,

11:19 this is going to be something that you're not going

11:22 to evade regulation just by very easily moving to Singapore.

11:25 So I do think that for those kinds of companies,

11:28 the approval process will become more difficult going forward.

11:33 Yeah, I think for the tech community,

11:34 it depends on which tech community you're talking about.

11:37 Because I live in Silicon Valley, there's obviously a very big community here.

11:41 And I think the overwhelming response for anyone who's paying attention,

11:46 and I think some people do because it's Meta involved, after all, is that, oh,

11:52 wow, this is going to have a huge chilling effect on, you know,

11:56 Chinese startups getting bought by US companies

12:00 or getting invested in by US investors.

12:04 I would say that fear is a little overblown.

12:07 You know, I'm very active in sort

12:10 of this cross-border window right between us and China,

12:13 and that just the Manus deal was very, very rare.

12:17 Both the investment from benchmark and the acquisition by Meta.

12:21 And I personally was surprised.

12:23 I was, I happened to be sitting next to someone, an AI application.

12:31 So not a model company, but an AI application CEO who had been funded

12:35 by tier one investors in China when this news broke out.

12:39 And I just asked them, I didn't know them very well what they thought,

12:44 and they thought it was very justified on the part of the government.

12:50 So I was a little surprised by that.

12:51 I was like, oh, doesn't that also kind of hurt your globalisation chances?

12:56 But again, from the perspective of many entrepreneurs,

12:59 it's not that many startups that are servicing

13:04 a global market without servicing Chinese market at all.

13:08 Most people do have services and revenue and maybe

13:12 even the majority of their revenues coming from China.

13:16 So they just don't see themselves as ever having that scenario happen.

13:22 You know, where they would even have a chance

13:24 of not alerting the government and having an acquisition close.

13:27 So the, I guess the target population towards which this would greatly upset

13:35 them is actually very small because the types of deals that you know,

13:40 of this type, and then the types of entrepreneurs

13:43 pursuing this specific business strategy is just not a majority.

13:48 That being said, I think the message got home

13:51 loud and clear to everyone I talked to, right?

13:54 It was very much like you got to pick.

13:57 Not necessarily that you got to pick China

13:59 or global because you definitely should be picking global,

14:03 but that once you do just start a company, you should have an idea of where,

14:10 which jurisdiction you're going to be in and which regulatory regime, right?

14:17 That you should really be careful not to run afoul of.

14:21 Do you think this could be the last time that, you know,

14:25 a big American company like Meta, though, bids for a Chinese origin company,

14:30 given the possible hurdles or you don't think that would have an impact?

14:34 Yeah, I think this is the last time.

14:36 I think exactly like what you said.

14:38 There's enough talent on both sides that it just won't

14:42 be worth the trouble to do something like this anymore.

14:46 I think going forward, yeah,

14:49 I think if you want to be acquired and you're on this side of the Pacific.

14:54 Probably people would consider starting in Singapore to begin with.

14:58 Right?

14:59 So you wouldn't get into this situation

15:03 in the first place that your data maybe Chinese, your incorporation is Chinese.

15:08 And it's complicated, right?

15:11 So I think when it comes to critical technology,

15:15 the AI the Chinese US competition is becoming,

15:19 it's creating increasingly separate ecosystems.

15:23 So on the Chinese side, they have their own models.

15:25 The models are increasingly using their own chips.

15:29 So it's moving towards separate systems.

15:31 And I think that really is not conducive to cross acquisition of technology.

15:38 And Beijing clearly doesn't want it.

15:40 And I think because it doesn't want that kind of competition,

15:43 Silicon Valley money coming over to take over homegrown talent.

15:47 Well, both of you have been talking about how

15:49 this competition between the US and China has been heating up.

15:53 Initially, the US was leading.

15:55 Chinese tech has been making news headlines quite a bit.

15:57 But as a big picture question,

16:01 who's leading the race at the moment, in your view?

16:03 Because Manus is running off AI technology from Anthropic,

16:07 which of course is an American company.

16:09 Let's start with you, Wendy.

16:11 China is forging its own way to try to get ahead because as we know,

16:16 I quite a disadvantage when it comes to their computing power,

16:22 which limits their ability to train frontier models.

16:26 That's why it's at least partly why all

16:28 the frontier models come out of Silicon Valley, still.

16:31 I think what China is doing is trying to focus on applications,

16:35 trying to move fast with policy, with commercial application,

16:40 to try and throw a lot of different things at the wall, right?

16:44 And also, Beijing is using policy like the AI plus policy to try

16:50 to push AI development across different

16:54 fields to aid the so-called real economy.

16:57 So to develop things in the medical field, for example,

17:01 or in finance, and then lastly, to combine AI with physical things.

17:06 So for example, electric vehicles and robots.

17:10 So basically leveraging their strengths

17:12 in manufacturing and having a large market

17:16 to develop AI applications and hope some of them get them ahead, right?

17:20 Rather than competing head on with AI, sort of the cutting edge.

17:25 The really most important word for China right now is self-reliance,

17:29 especially on such a critical technology.

17:33 And obviously, that shows up in the form of semiconductors.

17:38 And I think if you read the 15th five year plan, there's just so much about not,

17:45 it's not focused on the AI frontier models

17:49 or getting to artificial general intelligence or artificial superintelligence,

17:53 whatever it is, it's really not about that.

17:55 It's just about self-reliance across the entire stack.

17:59 And the most weak part of the stack are the chips, right?

18:05 And we'll see.

18:07 China's been making a lot of progress in that.

18:10 You know, I just came back from two weeks taking investors around China,

18:14 talking mostly to robotics companies,

18:17 a few AI companies and the overall atmosphere or overall narrative

18:25 is basically that everyone's waiting for the Huawei chips to come out.

18:30 They are the leader in both in terms of functionality,

18:34 but also in terms of potential supply.

18:38 And once they figure out how to produce at scale,

18:44 which, which is still a small question mark, right?

18:48 At this point, I think, you know,

18:50 Deepseek has said that, has basically made the announcement that they will be

18:56 doing their inference on Huawei chips in the second half of the year.

19:00 And everyone's expecting this scale up.

19:02 But assuming that scale up happens, it could really change things.

19:07 But that's what China's focused on, right?

19:09 It's really like a broad infrastructure play,

19:13 a broad, whole stack play like Wendy said.

19:17 President Trump is scheduled to go to China very soon.

19:21 Do you think this decision by Beijing to block this deal,

19:25 was it to maybe, possibly set an agenda ahead of that meeting?

19:29 And could, you know, maybe Mark Zuckerberg ask Trump to help with this deal?

19:34 I personally can't really see that happening.

19:36 It's not that important of a deal.

19:38 I don't see that rising to the national level agenda.

19:43 If there is discussion, it would be more broadly around how to deal with export,

19:51 you know, or like government oversight of deals of this nature.

19:56 And also, just to add the US government, like I don't,

19:59 I didn't see, you know, that much overt pushback from the US government.

20:04 I wasn't totally focused on that.

20:06 But I can tell you that, you know, in Silicon Valley at the time,

20:11 just with technologists and maybe some, you know,

20:16 politically active folks, they were very much against the deal.

20:20 They were like, you have $2 billion to acquire a company.

20:24 Why are you acquiring a Chinese company?

20:26 What do we know about the people that you're bringing in and, you know,

20:30 empowering them to then plug in into one of the most powerful user bases,

20:36 one of the largest user bases in the world, right?

20:38 Three billion plus users.

20:40 Have you thought about this?

20:42 Right?

20:42 Is this safe?

20:44 From the American perspective.

20:45 Yeah, I agree fully with that.

20:48 I think if they talk about anything tech, it might be the TikTok deal, right?

20:52 Which we haven't heard about in a while.

20:55 And I think there was actually a move to look into the investment

20:59 round into Manus from benchmark the Series B when that was announced.

21:04 So definitely agree with your point, Rui,

21:06 there that from both sides they don't want,

21:09 they don't really want this cross-pollination.

21:11 We'll pause this conversation here.

21:12 I'm sure this is not the first time and the last

21:15 time that we'll be talking about this as the competition heats up.

21:18 Rui and Wendy, thank you so much for joining me.

21:21 Thank you so much for having me.

21:23 Thanks for having me.

21:24 You've been watching Asia Specific from the BBC World Service with me,

21:28 Mariko Oi in Singapore.

21:30 If you have any questions or thoughts on what we

21:33 covered in this episode or any other stories from the region,

21:36 please leave us a comment below.

21:38 You can also get in touch with us

21:41 on email asiaspecific@bbc.co.uk and you know the drill.

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21:48 See you next time.