Beijing has tightened scrutiny of key industry firms in the wake of the deal, which has been largely completed
CHINA has decided to block Meta Platforms’ US$2 billion acquisition of agentic artificial intelligence startup Manus, a surprise move to unwind a controversial deal that has drawn fire for the leakage of technology to the US.
The National Development and Reform Commission ordered the deal’s cancellation in a brief statement on Monday (Apr 27).
The powerful state planner said in a one-line notice that it has decided to prohibit foreign investment in the startup in accordance with laws and regulations, without elaborating.
The ruling is likely to send a chill through China’s burgeoning AI sector, and emerged weeks before a high-profile summit between US President Donald Trump and Chinese President Xi Jinping.
Beijing has tightened scrutiny of key industry firms in the wake of the deal, which has largely been completed. The sale was initially hailed as a template for startups with global aspirations, but domestic critics have since lamented the loss of valuable technology to a geopolitical rival.
Manus’ founders got their start in China but relocated their headquarters and key staff to Singapore in 2025. It was not clear when the deal was announced in December 2025 whether Beijing would exert its authority on a transaction that technically took place beyond its borders.
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“The Manus block is a clarifying moment,” said Ke Yan, a tech analyst with DZT Research based in Singapore. “Manus was Singapore-incorporated with founders based here, and it still got pulled back. Beijing’s signal is that what matters isn’t where the legal entity sits.”
The decree on Manus may deal a setback to Meta as it looks to compete in AI against rivals from Microsoft and Alphabet’s Google to OpenAI and Anthropic PBC. Manus was supposed to help Meta leapfrog into a leading position in the hot sphere of AI agents, or services that use AI to execute tasks.
Still, it is unclear how Meta would unwind the deal. Manus employees have joined Meta, capital has been transferred and the startup’s executives have joined the US firm’s rapidly expanding AI team.
Manus staffers have already moved into Meta offices in Singapore, while investors including Tencent Holdings, ZhenFund and Hongshan have received their proceeds, said people familiar with the matter. The people spoke on condition of anonymity to discuss a private transaction.
Meta said in a statement that the deal complied with applicable laws and it expected a resolution to China’s investigation, without elaborating.
The company’s shares were little changed after trading got under way in New York.
Global AI arms race
Beijing’s regulators have wielded outsized power for years, forcing top executives at companies such as Alibaba Group Holding and Tencent Holdings to reform their business practices with little resistance.
Perhaps the closest parallel to the Manus move was Beijing’s decision to compel its leading ride-hailing player, Didi Global, to delist from the New York Stock Exchange shortly after its initial public offering in 2021. Once hailed as the Uber of China, the Beijing-based company has not been able to relist since and has a market valuation of about US$17 billion.
Beijing and Washington are jockeying for leverage ahead of their historic meeting in May.
As rivalry heats up in the AI space, Xi is trying to both fence off China’s top technology and talent from the US, while underscoring his growing confidence in the development of homegrown semiconductors.
The latter point was on display last week when the Chinese AI startup DeepSeek unveiled its V4 model that boasts deeper synergy with Huawei Technologies chips. That high-profile release looked timed to project confidence ahead of Trump’s visit.
The US has spent years restricting China’s access to American technology, including the Nvidia chips used to train most AI models.
“Beijing likely views this move as a justified tit-for-tat and mirroring of the export controls, investment restrictions, and counter-tech transfer probes by American authorities over the years,” said Brian Wong, an assistant professor at the University of Hong Kong.
Beijing’s agencies have since moved to discourage a repeat of the Manus manoeuvre, which was completed with unusual speed. The buyout triggered a Beijing probe into illegal foreign investment and tech exports shortly after its announcement.
Agencies including the National Development and Reform Commission have told key AI firms including Moonshot AI and Stepfun in recent weeks they should reject capital of US origin in funding rounds unless explicitly approved, Bloomberg News reported last week.
Regulators have also decided on similar restrictions for ByteDance, the owner of TikTok and the most valuable startup in the country.
Those restrictions risk further isolating China’s recovering tech sector from the venture backing that has underpinned it for two decades, much of which was sourced from American pensions and endowments.
It follows Beijing’s decision to restrict “red chips” – a type of Chinese company incorporated overseas – from seeking IPOs in Hong Kong, threatening to upend a decades-old playbook that helped Chinese companies tap foreign capital by floating overseas.
The overarching intent of the restrictions is to prevent US investors from taking stakes in sensitive sectors where national security is a priority. The twin moves suggest that regulators are worried about a leakage of home-grown technology abroad as Chinese-founded startups and companies explore international opportunities.
An uncertain path ahead
Launched in March 2025, Manus is a general AI agent capable of automating complex tasks, ranging from S&P 500 analysis to drafting sales pitches.
A month later, its parent Butterfly Effect raised US$75 million in a round led by Silicon Valley’s Benchmark, valuing it at US$500 million. The investment triggered a probe by the US Treasury over potential violations of restrictions on investments in sensitive technologies.
In July 2025, Manus relocated its China-based staff to Singapore, cutting dozens of roles in the process. Meta announced its acquisition in December after Manus surpassed US$100 million in annualised revenue.
It remains unclear what other action Beijing will take following its investigation. Manus co-founders Xiao Hong and Ji Yichao had been barred from leaving China, the Financial Times reported in March.
Beijing’s move reflects how important AI has become for China’s technological ambitions, especially against the backdrop of rising strategic competition with the US, said Alfredo Montufar-Helu, managing director at Ankura China Advisors.
In the same way that the US has tried to prevent China’s access to advanced semiconductors, China is now moving to constrain American access to AI tech, he said.
“It’s the Chinese leadership realising AI is a strategic asset,” he said. “And important in terms of who will emerge victorious in the strategic competition with the US.”
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