China may crack down on "Singapore-washed" tech companies
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China's government last week confirmed that it will review Meta's $2.5 billion acquisition of Manus AI, whose core team last year relocated from China to Singapore.
Why it matters: This could signal an end to "Singapore-washing," a strategy that's helped a number of Chinese tech companies secure foreign investment and commercial contracts.
Catch up quick: Manus was domiciled in the Cayman Islands, but was otherwise a Chinese company when Benchmark led its $75 million Series B round last spring.
- That investment sparked some social media criticism from other U.S. venture capitalists, plus a reported Treasury Department investigation to determine if violated outbound investment laws.
- A source says Benchmark invested with the understanding that the startup's 100 or so China employees would move south, which they quickly did. Less than a year later, the company was acquired by Meta.
State of play: China's Ministry of Commerce said, in response to a reporter's question, that it will review "this acquisition's compliance with laws and regulations related to export controls, technology import and export, and outbound investment."
The big question: What China might do if it determines that there's been a violation or just wants to nip Singapore-washing in the bud.
- Meta's social media platforms like Facebook and Instagram are banned in the country, but it does generate significant revenue from Chinese advertisers. That money could be threatened.
- More problematic could be consequences for China-based family members of Manus employees. As one source familiar with the deal said: "You don't personally need to be in China for China to have a lot of leverage over you."
The bottom line: The regulatory rules for AI are being written and rewritten in real time.
