China orders Meta to unwind Manus AI acquisition

• China ordered Meta to unwind US$2 billion+ Manus AI acquisition.
• The case adds risk to cross-border AI deals involving China-founded companies.

Chinese regulators have ordered Meta to unwind its acquisition of AI startup Manus, a company founded in China and headquartered in Singapore, under Beijing’s foreign investment national security review mechanism.

The National Development and Reform Commission issued the order on Monday, according to Reuters. The acquisition was valued at more than US$2 billion and had already been completed. Meta said on Monday that the transaction complied fully with applicable law and that it expected an appropriate resolution to the inquiry.

Manus develops an AI agent tool that can carry out complex tasks using Western and local AI models. The company was previously presented by Chinese state media for example of China’s AI development, with large language model company DeepSeek.

Manus’ China links come under scrutiny

The NDRC’s decision focuses on Manus’ links to China not the location of its incorporation or management team, according to China’s state-backed Global Times. The publication said regulators were concerned about the company’s connections to China through technology and data, as well as the possible impact of the deal on China’s industrial security and development interests.

Global Times also said a important point of concern was that Manus, built by Chinese engineers and in China’s infrastructure environment, had abruptly “cut ties” with China after receiving US investment.

The company’s co-founders, CEO Xiao Hong and chief scientist Ji Yichao, were summoned to Beijing for talks with regulators in March, sources told Reuters. The sources said both executives have since been barred from leaving China.

The Wall Street Journal reported on Tuesday, citing people familiar with the matter, that Meta was preparing to unwind the acquisition. It was not immediately clear how the company would reverse the completed deal.

Manus became part of Meta after the acquisition was announced in December, Reuters reported, citing sources. Its previous investors, including Benchmark Capital, HSG, ZhenFund, and Tencent Holdings, exited the company.

Deal process faces questions

Meta completed the acquisition after only a few weeks of due diligence, five people familiar with the matter told Reuters. The sources said neither Meta nor Manus sought Chinese regulatory approval for the deal or for the company’s relocation to Singapore.

A former Manus investor told Reuters that Meta was searching globally for AI targets as rivals advanced their own in-house models. A person familiar with Manus’ thinking said the founders viewed the Singapore relocation as necessary amid US-China tensions and closer scrutiny of technology investments.

Lawyers and analysts said the NDRC order adds regulatory risk to stake sales, asset transfers, and foreign acquisitions involving Chinese-founded technology companies. Han Shen Lin, China country director at The Asia Group, said Beijing had drawn a clear line around Chinese AI talent and technology being sold to US companies.

Although Manus did not build its own AI models, Beijing treats AI as a sensitive sector linked to national security. China has also sought to control outbound transfers of technology, intellectual property, and talent.

Lam Zhen Guang, a lawyer at Clyde & Co, said the case showed that a Singapore structure does not remove China-related regulatory risk if the business still has substantial links to China. He said investors in China-founded businesses would look more closely at operational separation, including IP ownership, research and development location and ownership disclosures.

Lam also said founders and venture capital investors would need to account for deal certainty risk in cross-border exits, especially where US buyers are involved.

Reversing the acquisition could be complex

The unwinding process could be complex because the deal has already been completed. Andy Han, a partner at AllBright Law Offices in Qingdao, said it could involve reversing equity transfers, returning funds, deleting transferred code and intellectual property, and withdrawing personnel.

Han said fully reversing such transactions is difficult in knowledge-intensive sectors because information transferred during due diligence or absorbed by engineers cannot easily be undone.

Jeremie Jourdan, a Brussels-based partner at Geradin Partners, said blocked deals are difficult to reverse unless the buyer has kept the target separate. He said that did not appear to be the case with Manus. Jourdan also said Manus’ move to Singapore could make enforcement harder for Chinese authorities, but Beijing may still have other ways to press Meta to comply, including through the company’s assets in China.

The NDRC decision comes weeks before a planned mid-May summit between US President Donald Trump and Chinese President Xi Jinping in Beijing.

Lin said US technology companies considering acquisitions of Chinese-founded AI startups would now need to treat NDRC foreign investment security review as a deal risk, regardless of where the target company is incorporated.

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