Cate Cadell

After China's cancellation of Meta's purchase of Manus, why would any founder start an AI company in China if they had a choice? In China you have access to less compute, less capital, and salaries are lower than in the West. And if you are so successful that a non-Chinese firm tries to acquire you for billions of dollars, the Chinese government will lure you back to Beijing, ban you from leaving the country, and take your profits by canceling the acquisition. Manus did everything right. They even moved their entire business to Singapore to comply with U.S. outbound investment restrictions. Their only mistake was that they originally founded the company in China. It's not even clear what it means for China to force Meta to unwind the transaction. Is it going to force Manus's researchers to return to China and place exit bans on them too? Is it going to force Manus's founders and shareholders to pay back $2 billion to Meta? This is what happens when you regulate by fiat rather than rule of law. Ultimately, this is a much larger defeat for the Chinese AI ecosystem than for the United States. Meta will be fine without Manus. But Chinese nationals looking to found AI companies will increasingly just start them overseas. The message from the Chinese government here is that every AI company founded in China will forever remain subject to Chinese government regulatory pressure and manipulation, regardless of its legal status or location. Lastly, given the Chinese government clearly believes that the US and Chinese AI ecosystems should be completely separate, we should stop helping their ecosystem succeed! China's AI companies remain extremely reliant on US compute, AI models, and chipmaking tools. If we tighten the screws on China's access to US tech, the Chinese ecosystem will be even less attractive to founders, and more will just start companies overseas.