When I scooped last year the Treasury investigation into Benchmark’s investment in Manus AI, a startup founded in China that moved to Singapore and then got acquired by Meta for $2 billion, I thought the biggest issue was US scrutiny.

Turns out it was China, which this week tried to put a fork in the blockbuster acquisition. It’s unclear exactly how the deal gets unwound, but it’s not really about Manus. It’s about the future Manuses.

The party is clearly over for AI startups out of China that have been flocking to Singapore. Without that workaround, VC funds with investments in Chinese companies are losing one of their best exit opportunities, creating a cap on investor returns. Sure, some companies might exit, but the ones with the most traction will be limited.

It’s also a reminder of how distinct the Chinese and American tech markets are today — and the divergence is only widening.

The question for the US government is how to use this situation to its advantage, rather than closing off further from the rest of the world. Reframing the move as a recruitment play could create an even bigger talent funnel, telling the smartest entrepreneurs in China that the US is the one place where you can innovate without fear.