The fallout from Beijing’s unprecedented intervention in the global AI market is beginning to reshape the corporate structure of China’s most promising startups. Following the Chinese government’s decision to block Meta’s acquisition of Singapore-based Manus AI, several leading Chinese artificial intelligence firms are reportedly weighing full onshore reincorporation.
According to a report by Winbuzzer, citing Bloomberg sources, prominent startups including Moonshot AI (creator of the popular Kimi chatbot), autonomous driving firm DeepRoute.ai, and StepFun are in discussions about moving their legal domiciles fully to mainland China.
This potential mass migration represents a fundamental shift in how Chinese tech companies structure themselves for growth and investment, effectively signaling the death of the offshore model that has defined the industry for two decades.
The Death of the “Manus Model”?
For years, Chinese tech startups have utilized offshore holding companies, typically registered in the Cayman Islands or British Virgin Islands, using a Variable Interest Entity (VIE) structure. This arrangement allowed them to bypass Chinese restrictions on foreign investment in sensitive sectors while raising capital from US venture funds and eventually listing on foreign exchanges, such as Nasdaq.
However, the NDRC’s decision to block the Meta-Manus deal has shattered the illusion that offshore incorporation provides immunity from Beijing’s regulatory reach. The National Development and Reform Commission made it clear that any AI company with significant Chinese operations, data, or engineering talent is subject to Chinese jurisdiction, regardless of where its holding company is registered.
As Bloomberg bluntly assessed the situation: “The Manus model is dead.” The offshore structure, once a bridge to global capital, is now viewed as a regulatory liability.
Regulatory Pressure and Capital Constraints
The push for onshore reincorporation is being driven by explicit regulatory guidance. In late April 2026, the NDRC issued warnings that AI companies with offshore structures accepting foreign capital above certain thresholds in “sensitive” AI sectors would face intense regulatory scrutiny.
For companies like Moonshot AI, which recently suffered a data leak involving its Kimi chatbot, the pressure to align fully with domestic regulations is immense. StepFun had already begun exploring reincorporation options in mid-April, but the Manus reversal has accelerated the timeline for the entire sector.
DeepRoute.ai, an autonomous driving company that previously raised significant capital from US investors, faces similar pressures as vehicular data becomes increasingly classified as a matter of national security.
The End of US Venture Capital in Chinese AI
The decision to reincorporate onshore carries profound financial implications. By moving their legal domiciles to mainland China, these startups will effectively cut themselves off from US venture capital. American funds, already constrained by Washington’s outbound investment screening rules, will find it nearly impossible to invest directly in onshore Chinese AI entities.
This decoupling forces Chinese AI startups to rely entirely on domestic capital—primarily state-backed funds, local government financing vehicles, and domestic tech giants like Alibaba and Tencent. While Chinese state capital is abundant, it often comes with strategic mandates that prioritize national industrial goals over rapid commercial scaling.
Furthermore, onshore reincorporation may severely restrict these companies’ ability to deploy their models overseas or compete in global markets, as foreign regulators will view them unequivocally as Chinese state-aligned entities. The era of the globally integrated Chinese AI startup appears to be closing, replaced by a bifurcated ecosystem where Chinese models serve the domestic market and the Global South, while US models dominate the West.
The mechanics of reincorporation are also deeply complex. Converting an offshore VIE structure to an onshore entity requires converting foreign-currency stakes into RMB, restructuring preferential rights under Cayman or British Virgin Islands law into instruments recognized under Chinese company law, and surfacing the VIE operating relationships that were previously kept off the formal balance sheet. The first company to complete this process will set the precedent for how foreign investors are made whole and how the operating company is valued at conversion, a negotiation that will be watched closely by the entire venture capital industry. The Bloomberg report notes that the NDRC has not issued a blanket prohibition on offshore structures, but has made clear that regulatory approval for any significant transaction, such as fundraising, acquisition, or IPO, will hinge on the company’s willingness to bring its legal domicile and data infrastructure fully onshore.