China’s Manus saga could make cross-border AI deals riskier

Beijing is reportedly about to revoke travel bans imposed on the founders of the AI startup Manus. This could put an end to one of the most bizarre moments of the AI arms race between the U.S. and China. But for foreign tech firms, the greater question is how safe an acquisition is when the company being acquired was created in China, even if it is relocated abroad.

The founders found themselves as stranded assets after Chinese regulators forced Meta to reverse its $2 billion acquisition of Manus. It drove the startup towards prospective Chinese investors. The timing appears meaningful. Weeks after the reversal, Beijing promulgated a comprehensive outbound investment framework that came into effect on July 1.

According to reports, the rules establish a formal legal basis for reversing completed foreign transactions. The regulations provide authorities with wider powers to review foreign investments associated with technology, data and national security.

Thus, the Manus dispute can be seen not so much as an isolated regulatory dispute, but rather as an early example of the exercises of power that Beijing has now legalized.

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