China orders Meta to unwind $2bn Manus deal in landmark cross-border block

TL;DR:

• China’s National Development and Reform Commission has ordered Meta to unwind its completed $2 billion-plus acquisition of AI agent startup Manus, even though Manus relocated to Singapore last year and was acquired through its Singapore-incorporated parent.
• Manus’s two co-founders were reportedly summoned to Beijing in March and barred from leaving the country, while staff have already moved into Meta’s Singapore offices.
• The decision is the most aggressive Chinese block of a US AI acquisition to date and turns “Singapore washing” — restructuring Chinese startups offshore to access Western capital — from a workaround into a regulatory trap, with direct implications for UK firms running cross-border AI operations.

China has ordered US technology giant Meta to unwind its $2 billion-plus acquisition of artificial-intelligence startup Manus, in what analysts and lawyers describe as one of Beijing’s most aggressive cross-border interventions to date. The National Development and Reform Commission’s foreign-investment security office said it would “prohibit foreign investment in Manus in accordance with laws and regulations, and requires the parties involved to withdraw the acquisition transaction”. The notice did not name Meta directly.

The move is striking because Manus is no longer, on paper, a Chinese company. After a $75 million round led by US venture firm Benchmark in May 2025, Manus shut its China offices, laid off staff, and re-incorporated its parent Butterfly Effect in Singapore — a structure designed to bypass both Chinese rules limiting AI IP transfer abroad and US restrictions on investing in Chinese AI firms. The pattern, often dubbed “Singapore washing”, has become a routine playbook for Chinese tech founders seeking Western capital. Beijing has now signalled it will not respect that perimeter.

How regulators got there

China’s commerce ministry opened a probe into the Meta deal in January, days after closing. Manus co-founders Xiao Hong (CEO) and Ji Yichao (chief scientist) were summoned to Beijing in March and later barred from leaving the country, according to five sources cited by Reuters. Manus staff have, however, already moved into Meta’s Singapore offices and projects are continuing despite the exit bans. Meta said in a statement that “the transaction complied fully with applicable law” and that it expected an “appropriate resolution”.

Lawyers point to a clear shift in Beijing’s reach. Carl Li of Chinese law firm Zhong Lun argues regulatory analysis of acquisitions is no longer limited to the place of incorporation: “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”. Wilson Sonsini’s Greater China head Weiheng Chen expects Chinese national-security clearance to become a “regular closing condition for cross-border tech deals”. Beijing previously took a softer line on Hong Kong tycoon Li Ka-shing’s $23 billion CK Hutchison ports sale to a BlackRock-led consortium — a deal welcomed by the Trump administration.

What this means for UK firms

For UK companies and investors, the Manus order is a structural signal as much as a single deal. Any UK-headquartered AI firm with significant China-origin IP, founder ties or historical R&D should now treat NDRC review as live exposure even when the formal corporate structure is offshore. Cross-border AI M&A will need new diligence on data flows and team provenance, and UK acquirers of Singapore- or Cayman-incorporated AI startups should expect longer timelines and potential Beijing veto risk — including for assets they thought were “free of China”. Manus itself was previously hailed by Chinese state media as the country’s “next DeepSeek” because of its general AI agent framework, although its product runs on top of Western large language models rather than building its own.

Looking forward

The order arrives weeks before a planned mid-May summit between Donald Trump and Xi Jinping in Beijing, and turns AI assets into a clear bargaining chip. UK readers should watch whether Manus formally appeals — and whether Beijing forces an unwind of an already-completed transaction. If it succeeds, expect a chilling effect on cross-border AI M&A involving any company with Chinese ancestry, and a quiet repricing of “offshore-restructured” Chinese AI companies in venture portfolios.