‘Manusgate’, Trump’s trip and the big China rip-off 

China has been accused of the high-tech heist of the century. It came days before Beijing blocked the US$2 billion takeover of Chinese artificial intelligence startup Manus by US giant Meta. Last week’s news also followed claims that DeepSeek was ripping off American rivals.

In shocking revelations, the White House has alleged that China has been “stealing intellectual property” from US AI labs on an “industrial scale.” The release of the memo looks certain to further strain relations ahead of President Donald Trump’s visit to Beijing next month.

“The US government has information indicating that foreign entities in China are engaged in deliberate, industrial-scale campaigns to distill US frontier AI systems,” Michael Kratsios, the director of the Office of Science and Technology Policy at the White House, wrote in a memo.

It was later shared on social media on April 23 and first reported by the Financial Times. The FT revealed that “the accusation” marked the “latest escalation in tech tensions, centering on Chinese groups allegedly raiding advanced” American AI research.

“The issue gained attention after DeepSeek was accused of using distillation – the process of training smaller AI models based on the output of larger [United States] ones – to build a powerful product at a lower cost,” the FT stated.

We know the deal was in trouble, but this is on the more extreme side.

Duncan Clark, an early advisor to Alibaba

Hide and seek:

• In what has become a predictable response, the Chinese Embassy in Washington called the “allegations baseless” in a statement.
• “China attaches great importance to the protection of intellectual property rights,” Liu Pengyu, the embassy spokesperson, said.

Delve deeper:  Four days after the memo, the Manus row erupted. Launched last year, the autonomous AI startup with roots in the world’s second-largest economy relocated to Singapore before being bought by Meta in December. The takeover is now effectively off.

Between the lines: “Clearly after Manusgate, founders will know that if you start in China, you stay in China,” Duncan Clark, an early advisor to Chinese behemoth Alibaba and chairman of consultancy firm BDA China, told the CNBC news network this week.

Bottom line: “We know the deal was already in trouble, but this draconian development is on the more extreme side of the likely outcomes,” he added, referring to the decision by the government’s National Development and Reform Commission to scupper the plan.

Big picture: So, where does this leave Trump’s visit to China and his high-level talks with President Xi Jinping? Reports suggest he “may not want to rock the boat” ahead of the trip.

China Factor comment: Still, unlike the old Cold War with the Soviet Union, the new 2.0 version between Beijing and Washington has a distinctive artificial intelligence feel.