AI deal sparks US-China tension: Manus abandons China
The recent artificial intelligence funding deal involving the startup Manus and Silicon Valley titan Benchmark has ignited a diplomatic firestorm, underscoring the escalating geopolitical fault lines in the global technology landscape. The transaction, which saw the Chinese-founded AI firm secure significant backing from the prominent U.S. venture capital firm, has reportedly drawn the ire of Beijing for Manus’s perceived abandonment of its home country, while simultaneously bringing Washington’s watchful eye onto its Silicon Valley backer.
Manus, a general AI agent designed to automate a wide array of tasks from data analysis to content creation, originated in China and was founded in 2022. The company, which offers solutions across various sectors including finance and healthcare, recently closed a $75 million Series B funding round in April 2025, spearheaded by Benchmark, valuing the startup at an estimated $500 million. This investment was notably channeled through Manus’s offshore entity for non-China development, a maneuver that likely enabled the deal to proceed amidst tightening U.S. investment restrictions. Manus has since established its global headquarters in Singapore, signaling a strategic pivot away from its original base.
Beijing’s reported displeasure stems from this perceived defection, viewing Manus’s move as a setback in its ambitious drive for technological self-reliance and global AI leadership. The exodus of tech companies, whether foreign or domestically founded, is a growing concern for China, as multinational corporations increasingly adopt an “Anything But China” strategy due to escalating U.S.-China tensions, supply chain vulnerabilities, and mounting geopolitical risks. While China continues to foster a vibrant domestic AI sector with significant state support and a surge in venture capital interest, the departure of a promising startup like Manus underscores the challenges Beijing faces in retaining talent and innovation in an increasingly bifurcated tech world.
Concurrently, Washington has intensified its scrutiny of U.S. venture capital investments in Chinese technology, particularly in sensitive areas such as artificial intelligence, quantum computing, and advanced microelectronics. An executive order issued in August 2023, followed by a “final rule” in October 2024, aimed to curb the flow of U.S. capital into Chinese tech firms deemed to pose national security risks. Reports from the U.S. House Select Committee on Strategic Competition between the United States and the Chinese Communist Party in early 2024 highlighted over $3 billion in investments by U.S. VC firms into Chinese AI and semiconductor companies, including some on U.S. blacklists, fueling calls for further restrictions. Benchmark’s investment in Manus, despite its offshore structuring, has inevitably drawn attention as Washington seeks to prevent the transfer of critical technologies to entities that could bolster China’s military or surveillance capabilities, maintaining a delicate balance between stifling innovation and safeguarding national interests.
This dual pressure on Manus and Benchmark exemplifies the complex and often contradictory demands placed on companies and investors operating in the current geopolitical climate. The global AI landscape is undergoing a significant realignment, characterized by an “AI arms race” and the fragmentation of once-interconnected tech ecosystems. As both the U.S. and China vie for technological supremacy, startups and venture capital firms are forced to navigate a treacherous terrain, balancing market opportunities with national security concerns. The Manus-Benchmark deal serves as a stark reminder that even seemingly routine investments can become flashpoints in the broader contest for technological dominance, shaping the future of global innovation and capital flows.