China banned the acquisition of artificial intelligence startup Manus by American giant Meta on the grounds that the purchase violated laws and regulations relating to technology exports and foreign investment. But, for experts, it’s not just about that.
Analysts say Beijing wants to show that sensitive Chinese technology needs approval to receive contributions from abroad, and that a company does not stop being Chinese just because it changes its headquarters, corporate structure or starts operating outside the country.
“The main consideration, I believe, is not Manus itself. It’s the fact that if Manus can ‘pick up its toys’ and move to Singapore without even asking for a permit, what would stop other strategic technology companies from doing the same?” says Kendra Schaefer, public policy consultant at Trivium China.
“So this represents the beginning of long-term regulatory efforts to impose more controls on the outflow of Chinese technologies as a matter of national security.”
The purchase announcement was made in December, with the startup indicating that it would join Meta for what it called the “next era of innovation.” The response from Chinese authorities, which began with the announcement of an investigation, came about ten days later.
The action reveals the Asian country’s willingness to protect high technology, since the negotiation had already been completed and the startup had transferred its operations to Singapore the previous year.
The transaction, valued at US$20 billion, adds a new layer to the dispute for leadership in artificial intelligence between Beijing and Washington and could bring the matter to the negotiating table between the two countries.
Chinese leader Xi Jinping and United States President Donald Trump are expected to meet in the Chinese capital in May to extend the truce that sustains the trade war between the nations.
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WHY DID META WANT TO BUY MANUS?
The acquisition of the startup by the American giant is seen as an attempt to equate Meta with competitors with more advanced technology in artificial intelligence, such as OpenAI and Google.
In the announcement, the American company stated that the negotiation was made as a way to “unlock business opportunities” in its own products.
In other words, Meta would integrate an AI agent already developed and capable of performing assistance, automation, productivity and execution tasks within its ecosystem – Facebook, Instagram, WhatsApp and Messenger, for example.
WHAT IS CHINA’S ARGUMENT TO BAR THE ACQUISITION?
When the investigation was announced, the Ministry of Commerce said it would be assessed whether the purchase complied with Chinese laws on technology exports and overseas investments.
On Monday (27), when prohibiting the transaction, the National Development and Reform Commission, responsible for the evaluation, said only that it “decided to prohibit foreign investment in the Manus project, in accordance with laws and regulations, and demanded that the parties involved cancel the transaction”.
The measure is treated as a matter of national security. A regulation in force since 2021 determines that foreign investments that affect the State must undergo rigorous review and establishes that the investor will be obliged to undo the operation if it has already been completed.
As further reassurance, in late March authorities instructed CEO Xiao Hong and chief scientist Ji Yichao not to leave China until further instructions, according to the Wall Street Journal.
HOW CAN BEIJING PROHIBIT A DEAL TRANSFERRED TO
ANOTHER COUNTRY?
According to experts, Beijing treated the case as an acquisition of sensitive technology, talent and data of Chinese origin and, therefore, applied the legislation to the company already installed in Singapore.
For Aynne Kokas, director of the Center for East Asian Studies at the University of Virginia, the action suggests that Beijing is expanding what it understands by Chinese companies in the technology sector.
“The security review appears to have been triggered because of ties to China. This is an expansive view of what constitutes a Chinese company.”
CAN THE BUSINESS BE UNDONE?
In theory, yes, as determined by the authorities’ decision. A sensitive point is that the order was published months after the acquisition was announced, suggesting that there was sharing of technology, staff and data at some level, in addition to Meta’s access to sensitive information.
The Wall Street Journal reported that the American giant is preparing to reverse the deal. According to the newspaper, Beijing gave the company a few weeks to undo the transaction and restore Manus’ Chinese assets to their original state.
Does this case create a precedent?
Yes. Kokas states that Beijing signals to companies that technologies developed in China, even when the company is no longer domiciled in the country, are subject to local regulations.
For Schaefer, the restriction creates the risk that “founders will simply decide to create companies abroad, rather than incubating them within Chinese borders and then transferring them abroad through complex corporate structures.”
Source: www.noticiasaominuto.com.br
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