(Yicai) April 28 -- Chinese regulators have ordered Meta to backtrack its USD2 billion acquisition of Manus, a Singapore-based artificial intelligence startup founded by Chinese entrepreneurs.

The National Development and Reform Commission, China’s top state planner, announced yesterday that in accordance with the law it would prohibit foreign investment in Manus and required the parties involved to reverse the acquisition.

Meta, perhaps best known as the US technology giant behind Facebook, Instagram, and WhatsApp, announced its acquisition of Manus at the end of last year. Media reports valued the deal at USD2 billion, making it Meta’s third-largest acquisition.

In January, China’s commerce ministry said the government would be looking into whether the deal complied with Chinese laws and regulations on export controls, technology trade, and foreign investment.

The central question is whether Manus’ core AI technology falls under China’s list of prohibited or restricted technology exports, especially the control items related to information processing technology in the revised version from last July, said Liu Anbang, a partner at DeHeng Law Offices.

The risk in technology export lies in whether core technologies developed in China, such as AI agent components and algorithms, are effectively transferred to an overseas business through personnel transfer, code sharing, or business migration without an export license, Liu explained.

When Manus moved headquarters to Singapore, it may already have crossed the red line for technology export controls, and its acquisition by Meta merely put that hidden risk under a “magnifying glass,” said Xia Bikang, a partner at law firm Yenlex Partners.

China’s review of the deal is not only about clarifying that case’s compliance, but also about further improving the compliance system and enforcement standards, blocking channels through which key technologies could leak out, and establishing the state’s sovereign jurisdiction and guiding rights over the cross-border flow of high-value science and technology companies, Xia noted.

Manus was founded in Beijing in 2022 by Xiao Hong and others. It began developing a namesake general AI agent in October 2024, with its core team mainly drawn from Chinese universities including Huazhong University of Science and Technology. The development was completed in Beijing and Wuhan.

In April 2025, Manus raised USD75 million in a funding round led by US venture capital firm Benchmark, lifting its valuation to USD500 million. In the June, the firm announced that it would relocate its HQ to Singapore and change the operating entity to Singapore-based Butterfly Effect.

The following month, Manus cut most of its China workforce, retaining only about 40 out of 120 key technical staff and moved them to Singapore, laying off the rest. Its Chinese social media accounts were cleared, and its website blocked access from Chinese internet protocol addresses.

Editor: Futura Costaglione