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- China orders Meta to unwind its $2 billion acquisition of AI startup Manus.
- The move highlights China's efforts to block U.S. firms from acquiring Chinese AI talent.
- Meta anticipates resolution, while Manus' executives face travel bans amid regulatory scrutiny.
BEIJING — China ordered U.S. tech giant Meta to unwind its $2 billion-plus acquisition of artificial intelligence startup Manus on Monday, as Beijing tightens scrutiny of U.S. investment in domestic startups developing frontier technologies.
The National Development and Reform Commission's move highlights China's commitment to preventing U.S. firms from acquiring Chinese AI talent and intellectual property, as Washington seeks to limit Chinese tech firms' access to advanced U.S. chips.
The NDRC's office for reviewing the security of foreign investments said it would "prohibit foreign investment in Manus in accordance with laws and regulations, and require the parties involved to withdraw the acquisition transaction."
It did not name Meta or other overseas investors in Manus.
"The transaction complied fully with applicable law. We anticipate an appropriate resolution to the inquiry," Meta said in response.
The move comes weeks before a planned mid-May summit between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing. China's commerce ministry announced an investigation into the sale in January, days after California-based Meta completed its December acquisition of the startup.
China rarely orders completed corporate deals to be unwound. But shortly after the deal was announced, the ministry said it would assess and investigate the acquisition.
Companies involved in foreign investment, technology exports, data transfers abroad and acquisitions must comply with Chinese laws and regulations, the ministry spokesperson said at the time.
Manus' two co-founders, CEO Xiao Hong and chief scientist Ji Yichao, were summoned to Beijing for talks with regulators in March and later barred from leaving the country, five sources familiar with the matter said. Xiao and Ji did not respond to requests for comment.
After a $75 million fundraising round led by U.S. venture firm Benchmark in May 2025, Manus shut its China offices in July, laying off dozens of employees.
It then moved its operations to Singapore without seeking Chinese regulatory approval, people familiar with the matter said.
This enabled Manus' parent company, Butterfly Effect, to re-incorporate in Singapore and bypass U.S. investment restrictions on Chinese AI firms, as well as Chinese rules limiting domestic AI firms' ability to transfer their IP and capital overseas.
It is not immediately clear how China will execute the annulment of a deal involving a Singapore-based company.
Manus staff have already moved into Meta's Singapore offices, with projects proceeding despite the exit bans on the two executives, two sources familiar with the matter said.
"It shows that the regulatory analysis is no longer limited to the place of incorporation of the target company. The origin of the technology, the location of core R&D, the nationality and location of the founding team, historical China operations, data flows, and the process of offshore restructuring may all become relevant," said Carl Li, a partner with Chinese law firm Zhong Lun, in a post on his LinkedIn page on Monday.
"In sensitive technology sectors, a deal may be reviewed not only as an M&A transaction, but also as a potential transfer of strategic technology, data, know-how and national security-sensitive capabilities," he said in the post.
The Manus order is the latest high-profile case of China blocking or challenging a cross-border transaction.
Last year, China criticized Li Ka-shing's CK Hutchison for agreeing to a $23 billion sale of dozens of ports worldwide to a consortium led by U.S. asset manager BlackRock. The deal was welcomed by Trump.
Warning case
The NDRC decision sends a stark warning to Chinese startups — especially in sensitive sectors such as technology — seeking to move operations to Singapore to access foreign capital, a practice often dubbed "Singapore washing".
"I would not say this ends Chinese companies moving to Singapore. Rather, it raises the compliance threshold," said Ben Chester Cheong, a lecturer at the Singapore University of Social Sciences.
"Companies may need to show a genuine operational shift: where management sits, where IP is owned, where R&D is conducted, where data is stored, and whether Chinese regulatory approvals are needed."
Meta acquired Manus to bolster its work on AI agents — tools designed to carry out complex tasks with minimal human intervention.
Manus was hailed early last year by state media and commentators as China's next DeepSeek after releasing what it said was the world's first general AI agent. The company does not build its own AI model, but an agent framework that operates on top of existing Western large language models.
AI has become central to strategic competition between the world's two largest economies, said Alfredo Montufar-Helu, a managing director at Ankura China Advisors.
"China is saying we will prevent foreign acquisition of assets we consider important for national security — and AI is now clearly one of them," he said.
Contributing: Kane Wu, Fanny Potkin, Jun Yuan Yong and Jaspreet Singh
