China Directs Meta to Reverse $2 Billion Acquisition of Manus AI

China has ordered Meta to unwind its $2 billion acquisition of Manus, an artificial intelligence (AI) startup, citing national security and regulatory concerns. This decision was announced by the Office of the Working Mechanism for Security Review of Foreign Investment under the National Development and Reform Commission (NDRC), as the country continues to enhance its oversight of foreign investments.

The regulatory body emphasized that the prohibition is not aimed at any specific country or company but adheres to a standardized legal framework for all cross-border investments. The directive underscores China's commitment to safeguarding its economic security and maintaining market order, according to an unnamed industry analyst.

A Transformative Deal Under Scrutiny

Meta, the U.S.-based tech giant, revealed in December that it had acquired Manus for approximately $2 billion. Manus, a subsidiary of the Beijing-based Butterfly Effect Technology Ltd Co, gained international attention when it launched its AI agent, which reportedly outperformed OpenAI's DeepResearch AI agent. The deal marked the third-largest acquisition in Meta's history and was part of its broader strategy to integrate advanced AI technologies across its platforms.

However, the acquisition quickly became a controversial move. Experts have criticized the transaction, arguing that Manus, developed with the support of Chinese engineers and infrastructure, pivoted away from its Chinese roots after receiving U.S. investment. This included relocating its headquarters to Singapore in July last year, laying off China-based employees, and ceasing its mainland operations.

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China's Regulatory Framework

China's decision to block the acquisition comes as the country refines its regulatory framework for foreign investments in critical technology sectors. "Regulatory rules in key technology areas are being further refined and standardized, helping create a more predictable and well-structured environment", noted Ma Jihua, a veteran industry analyst.

This is in line with China's recently revised Foreign Trade Law and its Catalogue of Technologies Prohibited and Restricted for Export. These regulations require cross-border transfers and related investment activities involving certain technologies to undergo security reviews and secure licenses. The Manus acquisition appears to have fallen under these stringent guidelines.

Earlier, He Yadong, spokesperson for China's Ministry of Commerce, stated that the government supports cross-border business operations and technological cooperation as long as they adhere to local laws and regulations.

Controversy Surrounding Manus

Manus has been a transformative player in the AI industry since launching what it claimed to be the world's first general-purpose AI agent in March 2025. This breakthrough led some foreign media to dub it the second "DeepSeek moment." The company also received $75 million in funding from U.S.-based venture capital firm Benchmark in April last year. However, this financing sparked an investigation in the United States, where laws prohibit American funds from investing in Chinese high-tech firms.

The NDRC's decision to prohibit the acquisition mirrors China's broader efforts to regulate cross-border mergers and acquisitions and ensure compliance with domestic laws. The directive is expected to drive further scrutiny of foreign investments in cutting-edge sectors.

As tensions over technology and foreign investments persist, China's firm stance on the Manus acquisition has highlighted the challenges of balancing global business ambitions with national security considerations. The repercussions of this decision may resonate across tech and investment sectors globally.

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