China Orders Meta to Unwind Its Manus Acquisition

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Four Months After the Acquisition Was Announced, a Deal-Unwind Order Arrived

Meta announced its acquisition of AI agent startup Manus in late December 2025. The deal was reported to be worth over $2 billion. Manus employees had already relocated to Meta’s Singapore office, and product integration was underway.

In February, reports emerged that Meta’s Ads Manager could access Manus, and in March, Manus unveiled a connection feature that let it read and analyze ad data. It’s worth separating two different things here: a new entry point appearing on-screen, and how deeply the two companies’ technology and data are actually integrated. Manus’s connection feature documentation

On April 27, roughly four months after the acquisition was announced, an office under China’s National Development and Reform Commission (NDRC) responsible for reviewing foreign investment security demanded the deal be unwound. Reports also surfaced that co-founders Xiao Hong and Ji Yichao had been barred from leaving China. This is a case that shows how regulatory issues can still alter a deal’s execution even after the acquisition agreement has been signed.

I see this as an episode that reveals just how sensitively governments now regard the cross-border movement of AI technology and talent. That said, the authorities haven’t disclosed the specific reasoning behind their decision. What criteria were applied, and how the unwinding will actually play out, are things we still need to confirm.

A fast-growing company chose to sell itself abroad

Manus moved through product launch, fundraising, relocation abroad, and acquisition in a remarkably short span.

After drawing attention with an agent demo in March 2025, a $75 million funding round led by Benchmark was reported in April. In July, the company moved its core team to Singapore, and in December it announced that its annualized recurring revenue (ARR)¹ had passed $100 million. The company described this as a record achieved just 8 months after launch. Since ARR annualizes recurring revenue at a given point in time, this doesn’t mean the company actually earned $100 million that year. Manus announcement

Manus is an AI agent that takes a user’s request, searches for information, runs code, and produces a finished output. If Meta acquires this technology, it could broaden the task-execution capabilities it offers to advertisers and general users. The business rationale for the acquisition lies in this potential for product expansion.

Manus started out as a Chinese company. Its original operator, “Butterfly Effect” (蝴蝶效应), was based in China for development before later relocating to Singapore. Even after setting up an overseas entity and offices, the technology, data, and investment obligations tied to that relocation process remained subject to review.

On January 8, China’s Ministry of Commerce announced that it would work with relevant agencies to assess and investigate whether the acquisition complied with regulations on export controls, technology import/export, and outbound investment. Then, on April 27, a public notice disclosed both a ban on the investment and a demand that the deal be withdrawn. Ministry of Commerce announcement

The April 27 notice stated that the “Manus Project’s” acquisition by a foreign party was banned as an investment, and demanded that the parties involved withdraw from the deal. It was described as an action taken in accordance with law and regulation, but the specific provisions applied, the grounds for the decision, and a concrete compliance deadline were not disclosed. NDRC announcement

The notice used the phrase “Manus Project.” But that single term isn’t enough to conclude that a new principle—asserting jurisdiction anywhere based solely on a technology’s country of origin—has been established. The fact that authorities intervened in this particular deal should be kept separate from the question of what legal standard might apply to other deals.

AI Software Investments Now Face National Security Review, Too

The US and China are paying attention not just to semiconductor supply, but to investment in and ownership of AI technology itself.

Since 2022, the US has tightened export controls on advanced semiconductors and manufacturing equipment bound for China. The logic: by controlling hard-to-replace supply chain chokepoints²—like high-performance GPUs and cutting-edge fabrication equipment—you can drive up the cost and time China needs to develop its own technology.

But AI development depends not just on hardware, but on training methods and software efficiency. The DeepSeek-V3 technical report describes training on H800 GPUs alongside efficiency improvements. This case shows that you have to look at both hardware access and algorithmic improvement together to properly assess AI capability and the real effect of export controls. DeepSeek-V3 Technical Report

The Manus incident shows that beyond the movement of physical equipment, the acquisition of software companies can also become a major subject of review.

Agents access permitted tools and accounts to carry out multi-step tasks in sequence—things like operating a browser, organizing files, or executing code. But what an agent can actually do on a given service depends on its integrations and permissions. Not every agent can freely manipulate a user’s payments or business systems without restriction.

China’s Foreign Investment Security Review (FISR)³ regime already covers information technology, internet services, and core technologies tied to national security. This latest action is a case of blocking an AI company acquisition within that existing framework—it is not an announcement that all AI software has been reclassified under the same legal category as semiconductors. Review Regulations

In April, Bloomberg also reported that companies including ByteDance, Moonshot AI, and StepFun were instructed to obtain government approval before accepting US capital. The report was based on anonymous sources, and it does not mean that the full text of a new regulation applying to all companies broadly has been made public. Still, it gives founders and investors in this space good reason to scrutinize the source of funding and the approval process more carefully. Reuters article carrying the report

How Do You Untangle People and Technology That Have Already Merged

Unwinding a deal means sorting out not just ownership and money, but work that’s already been integrated.

According to reports, employees have moved into Meta’s offices, and the sale proceeds have already been paid out to early investors. Some of Manus’s technology had already started to be integrated into Meta’s systems. This is why untangling the deal isn’t just about equity.

On May 21, Bloomberg reported that co-founders Xiao Hong, Ji Yichao, and Zhang Tao are considering raising roughly $1 billion from outside investors, plus contributing personal funds, to buy Manus back. There was also talk of restructuring the company as a joint venture with new investors and pursuing a Hong Kong listing. But this was still an early-stage discussion, and neither the valuation nor whether the deal will actually proceed has been settled. Bloomberg report

The same article also mentioned a projection that Manus’s revenue this year could reach about $1 billion. This isn’t a confirmed figure. And even setting projected revenue against the acquisition price doesn’t tell you whether it’s a cheap deal. That’s because whatever technology, customers, costs, and regulatory conditions remain after the split will all affect the company’s valuation.

Someone has to decide which technology and data the new owner will take, and separate access rights and operational ties from Meta’s systems. For the product to keep working, employees’ duties and customer support also need to be sorted out. From public information alone, it’s hard to know exactly how big or costly this work will be.

There is a U.S. precedent for government involvement in an already-completed deal. Chinese firm Kunlun Tech’s acquisition of Grindr went through a review by the Committee on Foreign Investment in the United States (CFIUS)⁴ and ultimately led to a divestiture. But the degree to which a company, its data, and its systems are intertwined varies deal by deal. The existence of precedent alone doesn’t mean Manus’s unwinding will be simple.

Oswarld’s Lens

What struck me was the timeline — how little time passed between the acquisition announcement and the demand to unwind it. A company that moved fast to integrate its business found itself, just months later, having to prepare for the reverse.

In my work on tech strategy, I’ve watched this tension play out repeatedly: product development moves at one speed, regulatory change at another. This case is a reminder that acquisition and integration timelines need regulatory review built in from the start. That said, the fact that the government acted quickly doesn’t tell us that some internal reclassification of a technology’s strategic status drove the decision.

The US has its own version of this. Since January 2025, it has enforced rules that prohibit or require notification for certain semiconductor, quantum, and AI investments tied to China, Hong Kong, or Macau. It’s not a blanket ban on all AI investment — the rules look at who the counterparties are, and at the specific technology and use case. US Treasury program regulations

For a founder sourcing technology and talent in China while raising capital in the US, both sets of conditions have to be checked together. Incorporating in Singapore doesn’t close the file on its own. Governance structure, the transfer of technology and data, and investor obligations all need to be verified against the actual deal — not assumed.

That uncertainty translates into real costs for founders and employees. A team that has already joined a company may have to be spun back out; fundraising and product roadmaps can shift as a result. I’d argue this is exactly when acquisition agreements need to spell out, in specific terms, who bears responsibility if approval fails and the deal has to be unwound.

Closing

There are three things I’ll keep watching in the Manus case.

The first is the standard the authorities applied. Since the published notice is brief, we need more explanation and actual case examples to see what requirements apply to other AI transactions.

The second is the relationship between the overseas corporate relocation and the technology transfer. We need to confirm concretely whether simply changing the company’s registered address settles existing obligations, and what approvals and procedures are actually required.

The third is whether the reacquisition and the carve-out are actually carried out. Funding reports and deal completion are different stages. We can only evaluate the outcome of this case once the new ownership structure is settled and we see how the technology, personnel, and customer service actually operate going forward.

Reading the authorities’ notice alongside legal experts’ interpretations lets us separate what’s been confirmed from what’s still unclear.

References & Further Reading

Primary sources

• Bloomberg, “Manus Weighs Raising $1 Billion to Unwind Meta Takeover”, 2026.5.21. : This is the exclusive Bloomberg report that sparked today’s newsletter.
• NDRC, Public Notice on the Decision to Prohibit Investment in Manus, 2026.4.27. : The official decision document released by the authority.
• D’Andrea & Partners, Meta–Manus Deal Prohibited, 2026.4.29. : A legal analysis of how China’s foreign investment security review relates to this deal.
• CNBC, “China blocks Meta’s $2 billion takeover of AI startup Manus, 2026.4.27. : The first report immediately after the NDRC order.

Background

• Fortune, “China’s decision to block the $2 billion Meta-Manus deal shows how far Washington and Beijing are drifting apart over AI”, 2026.4.28. : An analysis that surveys the bigger picture of US-China AI decoupling.
• CSIS, “Choking off China’s Access to the Future of AI, 2026.2. : Useful for understanding America’s semiconductor export control strategy and the expanding AI front.
• Contrary Research, “Deep Dive: Export Controls and the AI Race”, 2025.11. : A balanced treatment of the effectiveness and limits of export controls and China’s countermeasures.

The author is Oswarld (Kwangseob Ahn). Current roles: Adjunct Professor at Sejong University, Strategy Consultant at INLEVEL9. Career, research, books, and recent work are kept current on the About page. Latest · July 2026: HEMA-2: A Consolidation-Aware Tri-Memory Architecture with Multi-Channel Scheduling for Lifelong Conversational AI.

Footnotes

1. ARR (Annual Recurring Revenue): Annual recurring revenue. A core performance metric for SaaS companies, referring to the annual revenue generated from subscriptions. Often calculated as monthly revenue × 12. ↩

2. Chokepoint: An irreplaceable bottleneck point in a supply chain. In the semiconductor field, this refers to critical equipment that only one company can make, such as ASML’s EUV machines. ↩

3. FISR (Foreign Investment Security Review): China’s foreign investment security review system. The current review method took effect in January 2021, and a secretariat led by the NDRC and the Ministry of Commerce handles the reviews. Investments within a certain scope related to national security must be reported before execution. ↩

4. CFIUS (Committee on Foreign Investment in the United States): The US Committee on Foreign Investment. An interagency committee that reviews the national security impact of certain transactions, such as foreign acquisitions of US companies. ↩