When China regulators blocked the US$2 billion sale of AI startup Manus to Meta this week, many market watchers wondered if the acquisition could actually be unwound.
After all, investors in Manus had got their money, and some Manus staff were reportedly working for Meta already.
Today, however, comes news that Meta is prepared to undo its buyout of the AI startup that would have helped it close the gap with Big Tech rivals Anthropic, Google and OpenAI. Threats of penalties from China, no doubt, must have weighed in.
The outcome of this debacle is still unclear. What’s certain to any Chinese technology company that wants to uproot its talent and intellectual property to a “neutral” place like Singapore is to pause and reconsider.
That the two Chinese Manus founders were barred from leaving China should alarm other Chinese startup founders thinking of offshoring their operations after “growing up” in China.
Manus’ parent company Butterfly Effect had earlier relocated from China to establish itself as a Singapore-based company, reported Bloomberg. Coming out of China meant it could seek new investments outside of the country more freely.
Unfortunately, now that geopolitics have entered the equation, the Chinese government has blocked its sale to an American firm. It fears the transfer of AI technology – like the agentic AI innovation from Manus – will aid the United States.
This has long-term ramifications for Singapore, which has been attracting Chinese technology firms to relocate here because of the superpower rivalry.
Whether to avoid being hit by American sanctions or simply to raise capital outside of their home country, Singapore has appeared a safe haven for Chinese companies to set up operations.
For better or worse, “Singapore washing” is now not just a term used by American politicians and analysts to label Chinese companies using Singapore’s neutral status to bypass American scrutiny.
In blocking Manus, China is also signalling that it wouldn’t allow its promising technology companies to use Singapore as a way to cast off their Chinese roots.
This begs the question: How “Singaporean” should a Singapore-based startup be? Would a company that had benefited from the Chinese ecosystem in even a small way be always reached by the long arm of the communist government, even after it moves to Singapore?
Imagine Grab, which was founded in Malaysia, being subject to scrutiny from across the Causeway after it moved its headquarters to Singapore in 2014 and called itself a Singaporean company.
Butterfly Effect was only started in 2022 and its Manus AI agent technology debuted last year, drawing attention to its promise to do the jobs of analysts, developers and researchers.
If that is the standard, then Chinese firms coming to Singapore have to consider how deeply they have sunk their roots in their home country before trying to rebrand themselves as a Singapore-based company.
Already, some have rethought their strategies. Fast-fashion manufacturer Shein, for example, now says its roots are in Guangdong, after it had moved its headquarters to Singapore in 2022 and its founder had become a permanent citizen in the city-state.
Others have also tried to rebrand themselves in Singapore but failed. Most famously, TikTok’s chief executive appeared in front of the United States Congress in 2023 and stated that he was a Singaporean, not a member of the Chinese Communist Party.
Some Singaporeans were proud of a fellow citizen standing up to pesky American politicians at that time, but the episode didn’t change the impression that the popular social media app was ultimately controlled by its powerful Chinese parent ByteDance.
TikTok has now split its American app from its global business, in a deal in January with the US government to allow it to keep operating in the country.
For Manus, the “loss” is not just for Chinese companies that will now be wary of moving to Singapore, since restrictions might still reach them despite being overseas.
Singapore, too, would suffer from a loss of talent and investment as it pitches itself as an important base for innovative AI startups. As it is finding out, it cannot always float above the growing animosity between the world’s two biggest economies.
Even if a company is based in Singapore, it can be reached by regulators in Beijing or Washington, once it is deemed to valuable enough and had benefited from their home countries.
If a Chinese-linked company cannot convince either the American or Chinese government that it is indeed a true Singapore entity, what then is the small city-state’s value?
Surely, it needs to cast off this “Singapore washing” label because it offers much more. A stable and safe country is a good place to do business. A highly educated, motivated populace ready to embrace AI helps accelerate adoption. These should be the biggest reasons to be here.
