China Orders Meta to Unwind $2B Manus AI Acquisition

Key Takeaways

• China's NDRC has ordered Meta to reverse its $2 billion acquisition of AI startup Manus, the first such forced unwinding under China's 2020 foreign investment framework.
• Meta has already integrated Manus technology into its products, making the unwinding complicated. Options include a spinoff or resale to former investors.
• The move comes weeks before the Xi-Trump summit and is seen as both a warning to other US tech firms and a bargaining chip in broader negotiations.

China's top economic planning agency has ordered Meta to reverse its $2 billion acquisition of AI startup Manus. The deal closed earlier this year. Now Beijing wants it undone.

The National Development and Reform Commission (NDRC) issued a statement prohibiting "foreign investment" in Manus and requiring "the relevant parties to cancel the acquisition transaction." It's the first time China has used its 2020 security review framework to force the unwinding of a completed overseas AI acquisition.

Why Unwinding Won't Be Simple

Meta announced the acquisition in December 2025 and closed it earlier this year. The company bought Manus as part of its push to catch up with OpenAI and Google in the AI race. The problem: Meta has already integrated Manus technology into some of its own products.

According to the Financial Times, about 100 Manus engineers have been integrated into Meta's Singapore offices. The most likely paths forward include spinning off the acquisition to a new buyer or selling it back to Manus's former investors, including Benchmark Capital.

“In accordance with relevant laws, the Office of the Working Mechanism for Security Review of Foreign Investment has decided to prohibit the foreign investment in the acquisition of the Manus project.”

— China's NDRC official statement

The Singapore Strategy That Failed

Manus was founded in 2022 by Butterfly Effect, a Beijing-based startup. After a funding round led by US venture capital firm Benchmark Capital, the company moved its headquarters and core team to Singapore. The relocation was widely seen as an attempt to distance the company from Chinese regulatory oversight.

It didn't work. Multiple Chinese regulators began reviewing the deal in January 2026, including the NDRC, the commerce ministry, and China's antitrust watchdog. In March, authorities restricted Manus co-founders Xiao Hong and Ji Yichao from leaving the country.

A Warning Shot Before the Summit

Beijing has branded the acquisition a "conspiratorial" attempt to hollow out China's technology base. But the timing suggests more than nationalist anger. The NDRC's order comes weeks before a scheduled summit between Xi Jinping and Donald Trump.

A person briefed on the NDRC's thinking told the Financial Times that the gesture was "pretty harsh and it carries a strong intention to stop follow-on deals [like Manus]. In reality, it's hard to unwind a done deal, so it is more about verbal warnings on similar deals and the leveraging building before the Xi-Trump summit."

“Joining Meta allows us to build on a stronger, more sustainable foundation without changing how Manus works.”

— Xiao Hong, CEO of Manus AI, in December 2025

That foundation now looks unstable. Xiao Hong and co-founder Ji Yichao remain under travel restrictions in China, and their AI startup has become a flashpoint in the US-China tech rivalry.

What Happens Next

Meta has not publicly commented on the NDRC order. The company faces a difficult choice: fight the ruling in a jurisdiction where it has no leverage, or accept the unwinding and write off a $2 billion bet.

For other US tech companies eyeing AI talent and technology in China, the message is clear. Beijing now treats AI as a strategic national asset. Moving headquarters to Singapore doesn't change that calculus.

Frequently Asked Questions

Why did China block Meta's acquisition of Manus?

Beijing views the acquisition as an attempt to hollow out China's technology base. The NDRC cited national security concerns under China's 2020 foreign investment review framework.

Can Meta keep the Manus technology it has already integrated?

It's unclear. The NDRC has ordered the deal unwound, but Meta has already integrated Manus technology into some products. Options include a spinoff or resale to former investors.

Why didn't moving Manus to Singapore protect the deal?

Manus was founded by a Beijing-based company, and its co-founders are Chinese citizens. Beijing's regulators treated it as a Chinese asset regardless of the Singapore headquarters.

What does this mean for other US-China tech acquisitions?

It signals that Beijing will block deals involving AI talent or technology with Chinese origins. Other US tech companies should expect similar scrutiny.

Is this related to the upcoming Xi-Trump summit?

Sources briefed on the decision told the Financial Times the move is partly about "leveraging building" before the summit, suggesting it may be a bargaining chip.

Source: The Decoder / Maximilian Schreiner