China Orders Meta to Unwind $2.5 Billion Acquisition of AI Startup Manus

The Chinese government has handed Mark Zuckerberg’s Meta a deadline to undo its $2.5 billion acquisition of AI startup Manus, citing national security concerns. Citing sources familiar with the matter, a report by The Wall Street Journal claimed that Beijing has given the tech giant just a few weeks to completely “disentangle” itself from the startup and return its assets to their original state. The report claimed that the order from the National Development and Reform Commission (NDRC) marks a dramatic intervention in a global tech deal in which Meta acquired the Singapore-based, China-linked Manus in December to bolster its “AI agent” capabilities.

Since December, Meta has already integrated Manus’s advanced AI technology into its own systems. Beijing’s order specifically requires Meta to remove any previously transferred technology or data from Meta’s servers, fully return all Chinese assets to their original condition, and allow the startup’s founders to depart Meta as part of the rescission. According to the WSJ report, compounding the problem is the money. Major investors, including California’s Benchmark, have already received their financial returns from the $2.5 billion sale. This means that disentangling the finances of a closed deal involving international venture capital could lead to significant legal hurdles.

Although Manus operated through a Singaporean entity, its core technology was born at Beijing Butterfly Effect Technology, a firm Xiao founded in 2022. Under Chinese law, the government claims authority over any foreign investment that might carry a “national security risk,” especially when it involves sensitive AI algorithms. By blocking the deal, Beijing is sending a clear warning to other Chinese tech founders: homegrown innovation cannot be exported or sold to a geopolitical rival without state approval. The deal has placed Manus’s co-founders, Xiao Hong and Ji Yichao, in the crosshairs of the Chinese state. After being called in for meetings in March, the executives were reportedly told not to leave China while the investigation was pending.