On March 25, Manus co-founders Xiao Hong and Ji Yichao were barred from leaving China after a meeting with the National Development and Reform Commission in Beijing, as the Ministry of Commerce launched a national security review of Meta’s US$2 billion acquisition of their company.

By April 2, Beijing’s position articulated an explicit message: it supports cross-border operations, but only those that “comply with Chinese laws and regulations and follow due procedure.”

The Manus case is the clearest signal yet that, amid great power competition, the “Singapore washing” strategy has reached a critical limit. This has implications not only for future Chinese tech firms but also for smaller economies like Singapore seeking to bridge the increasingly divided global AI ecosystem by hosting these firms.

Dueling pressures

The strategy Manus chose is commonly known as “Singapore washing.” For some time, Chinese companies seeking international expansion and fewer domestic regulatory hurdles have relocated headquarters or operations to more open Southeast Asian economies, especially Singapore.

From there, Chinese tech firms can more readily access international capital and customers. Manus, originally founded in China, took this strategy to an extreme. In 2025, the AI agent startup made an abrupt decision to relocate entirely to Singapore, terminating most China-based employees and shutting down domestic operations.

This step was seen by management as pivotal in rendering the company “clean” for acquisition by American tech giant Meta. But in trying to satisfy Washington, Manus appeared to cross a red line in Beijing.

Pressure from both the United States and China on Chinese-founded AI firms is now unmistakable. In recent years, Washington has pursued active containment of Chinese AI companies, framing the AI race as a national security issue.

While most legal tools target firms operating within China or Chinese-controlled companies, pressure has also extended to Singapore and Malaysia. This was evident in US enforcement actions in 2025 and 2026 targeting entities linked to those countries for allegedly diverting restricted Nvidia chips to China.

Washington also pressured Malaysia to introduce chip export licensing and warned against deployment of Huawei Ascend chips. These steps signal clearly and firmly that the US does not want Singapore and Malaysia to become easy pathways for Chinese firms to bypass restrictions.

From Beijing, the pressure operates on a different logic but leads to a similar outcome. The Ministry of Commerce doctrine articulated through the Manus review establishes a principle: technological nationality follows where the technology was developed, not where the company is registered.

What matters to Beijing is where the model was trained, where the data was generated and where the engineers who built it acquired their expertise.

China does not object to companies relocating their headquarters, as long as core technology, data and intellectual property are not transferred. However, the Manus case may set a perilous precedent for future Chinese AI startups that build capacity domestically at a lower price and later sell those assets to Western big tech firms.

ByteDance, by contrast, illustrates what appears acceptable to Beijing. An early adopter of the “Singapore washing” strategy, it achieved international success through TikTok and is expanding AI capacity in Malaysia to circumvent U.S. chip export controls.

While ByteDance has also faced intense US scrutiny, Beijing has largely tolerated its approach because it has not severed ties with China. Its core operations, data and talent remain within the Chinese tech ecosystem. For ByteDance, Southeast Asia serves as an extension rather than an escape.

Beijing appears willing to let companies use Singapore as a launch pad, but not as an exit ramp.

Bridge economy bind

By hosting Chinese firms, Singapore and Malaysia have positioned themselves as bridges in a bifurcating global AI landscape. Through foreign direct investment, talent inflows and revenue-generating infrastructure such as data centers, this bridging model offers substantial economic benefits to these host countries.

However, the Manus case and parallel US enforcement actions expose structural vulnerabilities in this model. It was built on strong legal frameworks and investment-friendly ecosystems, but legal complexities around technology and data transfer have intensified as major powers like the US and China increasingly apply pressure.

Countries like Singapore cannot afford to be seen as conduits for sanctions evasion or as facilitating the transfer of Chinese intellectual property to US acquirers.

The implication is that countries like Singapore may need to strengthen regulatory frameworks to meet compliance expectations from both powers. In practice, this means developing more rigorous review mechanisms for cross-border AI transactions, ensuring companies comply with both US export controls and Chinese regulations on data and IP transfers.

Some countries have responded to the bifurcating AI landscape by pursuing a different path entirely. Gulf states, particularly the United Arab Emirates and Saudi Arabia, have invested heavily in domestic compute capacity and sovereign AI models, hoping apparently to turn the current bipolar AI system into a multipolar one.

South Korea, Japan and India are pursuing similar strategies. However, sovereign AI is costly, requiring energy, compute power and talent that many countries lack. For most Southeast Asian economies, the bridge model remains the most viable near-term strategy, making striking the right regulatory balance critical.

Neutrality as proof of work

While the outcome of the Manus case remains uncertain, one trend is clear: the AI era will not follow earlier patterns of offshoring, where companies freely leveraged offshore structures to maximize capital gains.

States are tightening their grip on intellectual property, talent and data. The era in which a small city-state or offshore holding structure could act as frictionless infrastructure between rival technology ecosystems is ending.

In an age of rising tech nationalism, every country in the AI supply chain must chart its own course — and neutrality is no longer a posture but a proof of work.

Minghao Sun is involved in AI strategy in the UAE, worked as a consultant to Gulf ministries and advised government entities on tech policy, economic policy and geopolitics with Whiteshield Advisors. He holds a BA in sociology from the University of Chicago.