Reflections on the Development of China's Software Industry from the Manus Incident

Original: Chen Wenqi Su Dongjun Qin Shuo WeChat Moments

One year ago, in March 2025, Chinese startup Monica released Manus, the world’s first general AI agent. On December 30, Meta announced it would acquire Manus for billions of dollars. Due to potential issues involving technology export, data transfer, and market concentration, the deal is currently under review by Chinese regulators.

Why did Meta acquire Manus? Simply put, it’s like Beijing’s Mei Lanfang Grand Theatre—very famous, with luxurious and complete hardware, but lacking a Mei Lanfang star performer. So they had to “acquire” one, packaging a “Little Mei Lanfang” star team to serve as their main attraction.

Manus is just such a rising star on the stage—bright and eye-catching.

Why are foreign companies interested in acquiring Manus?

Manus was developed entirely by Chinese people in China. Why did it move to Singapore first and then get acquired by Americans? Why didn’t domestic companies buy it?

Looking at the backgrounds of Manus’s three founders, their products are highly targeted tool-based solutions mainly aimed at business users, with a large proportion of paying overseas customers. Overseas clients highly value the B2B paid model.

So why don’t Chinese users use Manus? The main reason is high price.

Manus charges a basic monthly fee of $20 (about 140 RMB), with additional charges for overuse. Many clients pay thousands of dollars per month. For overseas customers, this is like hiring a tireless digital assistant 24/7, and they find it worth it; but domestic users have low willingness to pay, and $20 is already expensive. Many people have several free AI apps on their phones.

Why don’t domestic giants buy Manus? It’s said that a major domestic tech company once negotiated with them, offering tens of millions of dollars. In valuation terms, many domestic valuations are based on “replacement cost,” meaning the cost to develop the product oneself. For overseas top companies, M&A decisions focus on whether the target blocks their way or lacks something they need—preferably both—and also on saving time. Mergers and acquisitions can be a shortcut.

Is Manus moving to Singapore a “escape”?

For companies like Manus that mainly serve overseas markets, relocating operations abroad isn’t new or unique.

Manus established its Singapore entity long before product launch, as part of planned business and compliance arrangements, not a “flee after fame.” Its AI services target clients like OpenAI, Google, Anthropic—US-based AI providers that do not serve mainland China or Hong Kong. If Manus remained a Chinese company, purchasing these services and reselling to overseas clients could violate US sanctions, risking compliance issues. From a business and legal perspective, moving to Singapore makes sense and is reasonable. Even during restructuring, they provided proper compensation, and there are no known disputes.

The debate over China’s high-tech pricing power

The value and pricing of the same project vary greatly across markets—like a stone, its price depends on who’s looking.

This raises an important point—America still holds the global high-tech project pricing power.

In 2023, after the Russia-Ukraine conflict, many German manufacturing firms “fled” to China for investment because China’s manufacturing environment could support them. But few high-tech firms from Germany or Eastern Europe come to China; most prefer to “flee” to the US, which offers higher valuations.

Domestic high-tech project valuations often benchmark against the US. For example, Musk’s private space ventures are valued highly domestically; Starlink and internet satellite projects are favored; Nvidia’s value is high, and similar Chinese companies follow suit. Conversely, projects not recognized by the US are hard to price highly in China.

This logic made sense when domestic high-tech investments were mainly led by US firms like Sequoia Capital, relying on US markets for exit. But with US IPO channels blocked, valuation logic remains unchanged—domestic investors still use US standards. The US has the strongest original innovation and financial investment capabilities, forming a closed loop that maintains global high-tech hegemony.

The US excels at inventing concepts, whether or not they succeed. For example, the metaverse—currently unviable—no longer being promoted by Zuckerberg. Musk’s Mars ambitions—less talked about now. But their ability to innovate and lead global tech trends remains formidable.

Having participated in trade and tech wars, I’ve seen that the US is a “paper tiger” in some areas but a real threat overall. It’s tough for us to match it, but standing toe-to-toe is already a significant achievement.

It’s worth noting that the US is adopting new strategies in high-tech investment. Traditionally, China’s tech development was demand-driven. Now, US high-tech projects are valued directly by the stock market, without relying on industry demand, forming a closed loop. For example, Nvidia’s GPU business can boost the stock market with a few future contracts, then expand capacity through compute resource purchases.

The challenge for us is that China’s original innovation and financial sectors haven’t yet formed a mutually reinforcing mechanism. Although we aim for early, small, hard-tech investments and long-term focus, without profitable models, the investment cycle can’t close, making support illusory.

For example, state-owned investors face accountability for failures, with very low risk tolerance. This discourages investments in small or non-state tech firms, and financing conditions for private companies are especially strict. During implementation, flexibility is limited.

Private firms find financing difficult, with strict conditions—personal or spousal guarantees, and often requiring “betting agreements.” When entrepreneurs invest borrowed money into R&D, they often have little personal wealth left to fulfill these agreements. If the “bet” isn’t met (e.g., going public in three years), even with good cash flow, the company might be liquidated, leading to losses for all.

Concentration of tech investments and “flowering inside the wall, fragrant outside”

Due to these reasons, many domestic innovation activities—especially independent, individual, and SME innovation—face high risks and low market prices even if successful.

Many entrepreneurs say that working for a big company as a scientist and leading projects pays just as well as starting out independently. As a result, in recent years, tech investments have concentrated in top firms, leaving SMEs underfunded. R&D activities and personnel are also centralized, leading to monopolies in technology paths and funding.

From a national development perspective, we dislike seeing excellent high-growth companies like Manus being acquired by foreign firms. But since their clients are overseas, their core market is international. When domestic valuations are low, high international valuations are a positive sign.

Seeing Manus acquired by a US company is bittersweet. We’re proud that China can nurture world-class AI software, but also conflicted about the “flowering inside the wall, fragrant outside” outcome. Like parents raising a child to be an eagle, when it grows wings and flies into the sky, we’re happy but also reluctant to see it leave the nest.

But we must never clip its wings or force it to stay. For the benefit of the company, industry, technological progress, and our national mission of building a community with a shared future for mankind, regardless of motives, interference or restrictions are unacceptable.

Reassessing China’s software industry

Looking inward, we see that our software industry lags behind, becoming a weak link. In an era of rapid electronic information development, the software sector struggles to survive.

Domestic users’ low willingness to pay for software, widespread customization needs, and price wars have hurt the industry. Over 40% of listed software companies—including giants like UFIDA and Kingdee—are loss-making year after year, with an average net profit margin of only 2%.

The main causes are fourfold:

1. Not buying knowledge, only labor.

Early piracy culture in the software industry has backfired. Many now-famous internet giants have roots in selling pirated disks or cracked software. This experience fostered a value system that disrespects knowledge and prefers copying or stealing over purchasing.

The free logic of consumer internet has spread to enterprise software. Clients often see “software = free service,” equating software value with programmer wages. Pricing has shifted from “value-based” to “per head.” This per-head model turns knowledge into labor hours, often through bidding, leading to price wars that pit knowledge owners against each other—short-term saving but long-term innovation stifling.

2. Open source as shortcut.

Open source tech (like Kafka, PostgreSQL) was meant to lower barriers and accelerate innovation. But clients want to save money, and vendors want to reduce effort, leading to reliance on open source to cut development costs. This results in highly homogeneous, simplified products. Companies no longer compete on core technology but assemble cheap open-source components for tiny profits. Only a few firms tackling extreme scenarios (e.g., financial-grade stability, microsecond performance) can escape this trap.

Open source thus becomes a poison for software homogenization and cheapening.

3. Tendering system worsens the situation.

In central and state-owned enterprise procurement, the core idea is “compliance over value.” Under the guise of procedural justice, the lowest bid often wins. This discourages innovation and favors price wars.

Additionally, over 500 data and technology companies have been established within government agencies. Originally meant to integrate internal data and develop external tech products, these companies now monopolize project access, collect “management fees,” and outsource core functions, trapping external vendors in low-bid, high-cost delivery. If unchecked, this trend will worsen.

4. New tech waves sweep away old models.

The software industry must adapt to revolutionary changes in production tools, especially AI. AI coding tech will drastically reduce development costs and end the “billable code hours” model.

But this also offers opportunities: embracing AI tools to transform the massive existing software market, standardize core modules, and create new blue oceans.

Summary and suggestions on the Manus event

In conclusion, China’s software industry faces social, institutional, and technological challenges, making development difficult.

Manus’s low valuation in China isn’t accidental or due to ignorance.

Our main takeaways and recommendations:

First, Manus relocating to Singapore is mainly about compliance and proximity to overseas clients—normal business needs, not an “escape.”

Second, in today’s complex geopolitical environment, even ordinary corporate actions can be politicized, becoming tools in international struggles. Meta’s acquisition of Manus appears purely commercial but could lead US high-tech firms to poach talent and projects from China. Policymakers should be cautious.

Third, opposing simple bans on companies like Manus isn’t advisable. China’s high-tech sector includes many foreign experts and firms operating here for mutual benefit. In 2025, foreign investment in China’s high-tech industry increased by 150% year-on-year, accounting for 34.7% of all foreign direct investment. Foreign firms now focus on R&D centers and participating in frontier tech ecosystems, making China a global R&D hub. If Chinese-developed tech can’t be smoothly promoted globally, the business logic breaks.

Therefore, arbitrary interference risks setting bad precedents, damaging China’s image, and discouraging foreign tech investment. Policies should be carefully crafted.

Fourth, strict controls on overseas M&A of high-tech firms conflict with China’s strategic goals. Since 2018, we’ve emphasized opening up rules and systems, aiming to build a global tech high ground and contribute to humanity. Without users, costs can’t be recouped; without global compatibility, firms risk isolation.

Specifically, China has developed a unique tech system in information technology. The next goal is to leverage China’s manufacturing strength to export standards and build a global tech ecosystem based on Chinese technology, integrating with US and European systems.

While Manus’s outward move is regrettable, as a Chinese-grown company, it also promotes Chinese standards and technology. From a strategic perspective, that’s positive.

What we should do is reform systems, optimize the domestic investment environment, and enable better development at home. For example, reform investment evaluation methods—especially for state-owned capital—build a knowledge-based market, regulate the internet ecosystem, combat “pay-to-win” traps, and encourage users to pay for knowledge, allowing companies to profit through compliant operations.

Disclaimer: The above reflects only the author’s personal views and not those of Sina Finance Headlines. For issues related to copyright or content, please contact within 30 days of publication.

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