Why China pulled the plug on Meta-Manus deal—and what it means for big tech
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China has directly ordered Meta to roll back its $2 billion acquisition of Manus, an AI startup company. This comes as a result of Beijing intervening in foreign investments in local startups which deal in sensitive sectors such as artificial intelligence.
Why did China step in, and what exactly did regulators say?
China’s National Development and Reform Commission (NDRC) framed the decision in regulatory terms, stating that the transaction violated rules governing foreign investment in sensitive sectors. In a statement, the body, without mentioning Meta, said that it will “prohibit the foreign investment in the acquisition of the Manus project” and “requires the parties involved to withdraw the acquisition transaction”. The deal risked the transfer of “core technologies, data resources, and high-end talent” overseas, and ordered the parties to unwind the acquisition.
This comes as an effect of Chinese regulators planning to block tech firms, including leading AI startups, from accepting US investment without government approval, as per a Bloomberg report.
Meta, for its part, has responded cautiously. According to Reuters, the company said it would review the regulator’s decision and assess its next steps, without committing to a challenge or an exit timeline.
What is Manus?
Manus was founded by CEO Xiao Hong and chief scientist Ji Yichao in China in 2025, and was deemed the country’s next DeepSeek. It made headlines when the company launched the world’s first autonomous AI agent, which was capable of travel bookings, coding and executing complex tasks with minimal human input.
To secure funding and later get acquired by Meta, the founders shut shop in China by laying off the local staff and shifted base to Singapore. Manus is not the only company to move overseas. Such shifting is called “Singapore washing.” In tech terms, it refers to moving to Singapore in order to secure global funding and not face extreme regulations.
Till now, China was tolerant of this, but with Manus, it brings about a change in how the country will further deal with this trend. Reports suggest that key Manus stakeholders were also asked to return to China during the deal process and were subsequently restricted from leaving.
How does this fit into Meta’s long, complicated relationship with China?
This is not the first time Meta has been caught in loggerheads with China. Instead, their over-a-decade-long relationship is paradoxical. Meta’s core platforms—Facebook, Instagram, and WhatsApp are blocked in China, largely over concerns about uncontrolled data flows and the inability of authorities to enforce local content and surveillance rules.
Yet economically, the relationship is far from severed. Chinese companies are among Meta’s largest advertisers, using its platforms to reach global consumers. A December 2025 report by Reuters noted that a significant share of Meta’s advertising revenue is tied to China-based businesses, making over $18 billion in annual sales in 2024, more than a tenth of the company’s global revenue.
But Meta calculated that about 19% of that money – more than $3 billion – was coming from ads for scams, illegal gambling, pornography and other banned content, according to internal Meta documents reviewed by Reuters.
What does the Manus case change?
Previous flashpoints between Meta and China were about access, whether the company could enter the market, and under what conditions. This one is about ownership. By forcing an unwind, Beijing is making clear that when it comes to AI, even indirect pathways, acquisitions, minority stakes, and offshore structures will be scrutinised if they lead to foreign control.
That shifts the terms of engagement. For companies like Meta, expanding in China-adjacent tech sectors will increasingly mean building capabilities independently rather than buying them. For China, it reinforces a model where capital can flow in selectively, but control over data, talent, and intellectual property does not.