China Pulls the Plug on Meta’s AI Acquisition
Welcome to Foreign Policy’s China Brief.
The highlights this week: Beijing overturns Meta’s acquisition of a Chinese-founded AI company, the Iran war complicates the U.S. ability to defend Taiwan, and an accounting giant is caught up in the fallout from Evergrande Group’s case in Hong Kong.
Welcome to Foreign Policy’s China Brief.
The highlights this week: Beijing overturns Meta’s acquisition of a Chinese-founded AI company, the Iran war complicates the U.S. ability to defend Taiwan, and an accounting giant is caught up in the fallout from Evergrande Group’s case in Hong Kong.
On Monday, China blocked Meta’s acquisition of Manus, an artificial intelligence firm founded by Chinese entrepreneurs and based in Singapore. The move marked a reversal, as Beijing approved the $2.5 billion deal last December.
The decision to undo the acquisition does little to keep Manus’s knowledge inside China, since Meta has had months to absorb the company’s data and systems. Plus, there is no obvious mechanism to unwind those transactions: Manus’s investors were already paid, meaning that Meta will likely have to eat the loss.
So, what explains this swing from approval to cancellation?
The regulators who initially signed off on the deal likely focused on its legal and economic dimensions, before the security state suddenly intervened. A single senior official—possibly Chinese President Xi Jinping—becoming aware of the deal and deeming it counter to China’s interests amid global AI competition might have even triggered the shift.
There is not much that Meta can do about the Manus decision, especially because Chinese advertising on its core platforms—including Facebook—rakes in more than $18 billion annually. Any pushback could put an end to that business. Further, Meta’s complicated history with China helps explain authorities’ distrust of the company.
Facebook has been banned in China since 2009, yet the appeal of a market of more than a billion users led CEO Mark Zuckerberg to embark on a charm offensive there in the 2010s. This included telling his employees to read Xi’s essay collection The Governance of China, as well as a highly publicized jog through smoggy Beijing that made him an online laughing stock.
Xi rebuffed Zuckerberg’s overtures. According to one former Facebook executive, the Chinese leader instructed subordinates to physically prevent Zuckerberg from engaging with him at an event. Zuckerberg even offered to give authorities the ability to censor posts on Meta platforms, but Beijing’s suspicion remained.
Part of the miscalculation was cultural. Zuckerberg approached Xi with the kind of obvious sycophancy that is typical of inferiors in the Chinese Communist Party (CCP), rather than the subtle deference and performed camaraderie that would be appropriate for buttering up a leader such as Xi.
After attempting to court Lu Wei, China’s chief censor who ultimately fell on corruption charges in 2017, Zuckerberg pivoted to Washington. There, he recast himself as a champion of free speech—and later, after U.S. President Donald Trump’s reelection, repositioned himself as an anti-woke and hypermasculine figure.
But Meta’s difficulty in China has little to do with its CEO’s behavior; it’s because Meta is a U.S. company.
The Chinese security state doesn’t understand Silicon Valley’s complicated relationship with Washington, in which private companies can sue the government and win—an inconceivable idea in China—and still cooperate on security issues. The Manus case highlights Chinese intelligence’s assumption that Meta has no power to resist demands from the state.
Though Manus is nominally headquartered in Singapore—a common practice by Chinese-founded companies to avoid foreign scrutiny—such arrangements offer limited insulation under pressure. Manus has no choice but to obey the new orders from China, not least because its founders, both Chinese citizens, are blocked from leaving the country.
Meta may accept the Manus decision to keep its Chinese business viable, but the episode should be a cautionary lesson for Western firms that believe they can sidestep global tensions. As AI competition is increasingly framed as a global arms race, Beijing will continue treating it as a matter of national security.
Could the United States defend Taiwan? The Iran war has reportedly depleted U.S. munitions stocks enough that internal U.S. military evaluations suggest it would be hard-pressed to defend Taiwan against a Chinese invasion. Contrary to the more alarmist opinions, China is in no immediate position to exploit this vulnerability.
An invasion is a massive political and military project that would require months of mobilization; it can’t be thrown together in a weekend. What China will be watching closely, however, is how fast the United States can replenish those stockpiles—as a measure of both its near-term vulnerability and its commitment to fighting a long war.
Though China may have procurement problems in its military, largely because of corruption, Beijing has shown a greater ability to identify and address security vulnerabilities in the last decade than Washington has.
Anti-corruption regulations. Chinese courts—which often change the law on CCP orders through so-called judicial interpretations—have lowered the threshold for corruption charges, the latest move in Xi’s ongoing anti-corruption campaign. The new regulations, which take effect on May 1, also reduce the disparity in punishments for private versus state-owned enterprises.
However, more severe punishment will do little to deter future graft in China. What is needed is greater transparency and the dismantling of nepotism and favor-trading within the government, but such measures are incompatible with the way that power functions in the CCP.
Evergrande fallout in Hong Kong. Accounting giant PricewaterhouseCoopers (PwC) is in trouble in Hong Kong in the wake of the demise of Chinese property developer Evergrande Group. PwC’s Hong Kong office has already been hit with substantial fines, and staff in both Hong Kong and mainland China have been detained and may face criminal charges.
Evergrande, once the world’s largest real estate company by valuation, was dissolved in 2024, and its founder recently pleaded guilty to financial misconduct and bribery charges on the mainland. Evergrande was decimated by the collapse of the Chinese real estate bubble during the COVID-19 pandemic, but regulators delayed its closure to avoid a “Lehman moment.”
Fraud, graft, and bribery in China’s real estate industry were already well-known. What is notable in this case is how readily a reputable international firm went along with dubious practices to retain clients.
Iran war strains. China is somewhat insulated from the current global energy crisis thanks to stockpiled oil reserves and its world-leading alternative energy networks. But the continued closure of the Strait of Hormuz has disrupted key supplies and begun to strain the Chinese manufacturing sector.
Thailand—absent support from its ally the United States—has approached China for help in facilitating the passage of its vessels, to which Chinese Foreign Minister Wang Yi responded that China has 70 of its own ships trapped behind the strait.
On Tuesday, the Financial Times reported that China was preparing to relax its export ban on certain fuels, which could buy it some goodwill with its poorer, smaller neighbors.
James Palmer is a deputy editor at Foreign Policy. Bluesky: @beijingpalmer.bsky.social
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