China has formally blocked Meta’s proposed $2 billion acquisition of Manus, a high-profile Chinese general-purpose agentic AI startup, and moved to clear up misperceptions around the decision, emphasizing that the prohibition targets regulatory circumvasion rather than domestic firms’ legitimate overseas expansion or foreign inbound investment.
The ban was issued on Monday by the Office of the Working Mechanism for Security Review of Foreign Investment under the National Development and Reform Commission (NDRC), which ordered the involved parties to unwind the unreported transaction entirely. In the days following the ruling, Chinese state media outlets published a series of explanatory commentaries to outline the policy logic behind the decision, aiming to avoid misinterpretation that the move signals a broader crackdown on foreign capital or restrictions on Chinese tech firms going global.
Chinese policy analysts stress that Beijing does not intend for the Manus ruling to send a misleading signal to the global investment community. As a CCTV-affiliated social media account Yuyuan Tantian clarified in a Thursday article, China’s existing Measures for the Security Review of Foreign Investment draw clear boundaries for regulatory scrutiny. Under the framework, all investments touching on national defense security require mandatory declaration regardless of foreign stake size, while for key sectors including core information technology, internet products and services, and critical technologies, any transaction that grants actual control to a foreign investor falls within mandatory review scope.
Manus, the article noted, fits clearly into this defined key technology category as a developer of general-purpose AI agent systems. Meta’s proposed acquisition would have transferred full actual control of the startup to the US tech giant, yet neither party submitted the required proactive declaration to Chinese regulators, making the ruling a straightforward application of existing law.
The article added that Chinese regulators assess risk across three core dimensions: technology, talent and data. All of Manus’s core assets — including its foundational algorithms, training data and core R&D team — were developed by domestic teams within China’s borders, so any transfer of control overseas legally requires a national security review. The commentary also pointed to growing global trends of expanding security review scopes and blurred threat definitions that specifically target other countries’ AI development, a practice that China must guard against to protect its own strategic technology ecosystem. Even as it enforces security rules, China remains committed to supporting AI innovation and maintaining an open market for foreign investment, the article emphasized.
The Manus transaction grew out of a new regulatory workaround that has emerged since the United States barred American investment from China’s domestic AI sector in October 2024, dubbed “Singapore washing.” The term describes the practice of Chinese AI firms spinning off operations or relocating their registered headquarters to Singapore to avoid US investment restrictions and raise foreign capital. In the case of Manus, the startup restructured its operations to sever formal ties with its Chinese origins to secure Meta’s investment, a strategy that the ruling has now invalidated.
Manus first captured global tech industry attention when it made its high-profile debut in March 2025. Unlike conventional large language models such as ChatGPT or DeepSeek, Manus is positioned as a general-purpose AI agent capable of completing complex, multi-step tasks traditionally handled by white-collar workers. In promotional demonstrations, co-founder Xiao Hong showcased the system’s capacity to sort through 10 candidate resumes, identify a New York City property matching a set budget, and analyze stock correlation trends between Nvidia, Marvell Technology and TSMC, leading the startup to adopt the slogan “Leave it to Manus.”
The acquisition deal began taking shape in 2025, as Manus restructured to move its registered headquarters to Singapore between June and July that year. It reorganized under a new Singapore-based operating entity, Butterfly Effect Pte, reduced its mainland Chinese team from more than 120 employees to just 40 core members who were relocated to Singapore, deleted all Chinese-language social media accounts, and blocked IP addresses based in China from accessing its official website. By the end of 2025, Manus presented itself as a fully Singapore-based company, and Meta announced the $2 billion acquisition on December 30, with Xiao Hong slated to take a senior leadership role at the US firm.
Chinese regulators launched their formal review of the unreported transaction in January 2026, and by late March, Xiao Hong and co-founder Ji Yichao were barred from leaving China as the review progressed. The formal ban on the deal was issued on April 27.
According to Chinese analysts, Manus crossed three non-negotiable red lines in its restructuring and dealmaking: technology sovereignty, data sovereignty and national security. “Where the technology originates determines jurisdiction,” explained Guangdong-based business columnist Shengchandui. Manus’s core algorithms and core team were built entirely within China, so shifting the company offshore and selling it to a foreign buyer amounts to unauthorized export of domestically developed strategic capabilities, a form of “technology smuggling” that weakens China’s domestic innovation base. The columnist added that Manus processes vast volumes of user data, much of it originating from Chinese users, so transferring control overseas creates unacceptable risks of data leakage, particularly under existing rules governing cross-border data transfers. As AI agents are emerging as core infrastructure for digital work, communication and software development, putting a system built on Chinese technology and data under full foreign control creates unacceptable national security risks, he noted.
Zhu Youping, a researcher at the NDRC’s State Information Center, clarified that the ruling is not a restriction on legitimate global expansion by Chinese firms, but a prohibition on efforts to evade national regulation. “If the proposed acquisition is completed, Meta would obtain 100% control in Manus, but neither Meta nor Manus had declared this to the Chinese regulators,” he said. Regulators apply a “look-through” approach that focuses on the actual origin of technology, the source of training data and ownership of core talent, rather than just the jurisdiction where a company is registered. “Manus’s relocation to Singapore is essentially a case of using domestic resources to incubate value and monetizing it through an offshore structure to bypass oversight,” Zhu added.
Beyond blocking the unauthorized transaction, Chinese authorities have signaled that they want Manus to remain rooted in China to contribute to the country’s fast-growing domestic AI industry. In a Tuesday editorial, the Global Times noted that “China’s AI industry has entered a phase of rapid development, with a sustained burst of innovative vitality, making it a fertile ground for global AI innovation. We hope that more technology and innovation enterprises, including Manus, can find their place in this blue ocean in China, develop confidently, grow larger and stronger and achieve better development and breakthroughs.”
The Manus ruling aligns with Beijing’s latest policy push to scale up domestic AI adoption for economic growth. On April 21, China’s State Council released a policy document outlining 20 measures to expand and upgrade the country’s AI sector, setting a target of growing total industry output to more than 100 trillion yuan (approximately $13.8 trillion) by 2030, up from 81 trillion yuan in 2025. The policy specifically supports deployment of AI tools in high-impact areas including intelligent programming, contract review, financial services and supply chain optimization, and calls for the construction of national AI application testing bases.
Pang Chaoran, a researcher at the Chinese Academy of International Trade and Economic Cooperation (CAITEC), said the new policy marks a clear shift in China’s AI strategy: instead of focusing primarily on subsidizing AI model training, Beijing is now encouraging private service sector firms to adopt AI models and agents at scale. By driving widespread adoption of AI tools across industries, the government aims to accelerate commercialization of AI innovation, embed the technology deeper into real economic activity, and generate new growth momentum for both the service and technology sectors.