BN portfolio: China halts Meta’s $2 billion Manus AI deal, escalating tech tensions

Key topics:China blocks Meta’s $2B Manus AI acquisition over tech security concernsMove signals tighter control on foreign investment in Chinese AI firmsDecision heightens US-China tensions ahead of key leadership summit.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Bloomberg News.China has decided to block Meta Platforms Inc.’s $2 billion acquisition of agentic AI startup Manus, a surprise move to unwind a controversial deal that’s drawn fire for the leakage of technology to the US.The National Development and Reform Commission ordered the deal’s cancellation in a brief statement Monday. The decision was made in accordance with laws and regulations, the powerful state planner said in a one-line notice, without elaborating.The ruling is likely to send a chill through China’s burgeoning AI sector, and emerged weeks before a high-profile summit between US President Donald Trump and China’s Xi Jinping. Beijing has tightened scrutiny of key industry firms in the wake of the deal, which has been largely completed. Initially hailed as a template for startups with global aspirations, critics have since lamented the loss of valuable technology to a geopolitical rival..Manus’s founders got their start in China but relocated their headquarters and key staff to Singapore in 2025. It wasn’t clear, when the deal took place, whether Beijing would exert its authority on a transaction that technically took place beyond its borders.“The Manus block is a clarifying moment,” said Ke Yan, a tech analyst with DZT Research based in Singapore. “Manus was Singapore-incorporated with founders based here, and it still got pulled back. Beijing’s signal is that what matters isn’t where the legal entity sits.”The decree on Manus may deal a setback to Meta as it looks to compete in AI against rivals from Microsoft Corp. and Alphabet Inc.’s Google to OpenAI and Anthropic PBC. Manus was supposed to help Meta — which had been playing catchup — leapfrog into a leading position in the hot sphere of AI agents, or services that use artificial intelligence to execute tasks..Still, it’s unclear how Meta would unwind the deal. Manus employees have joined Meta, capital has been transferred and the startup’s executives have joined the US firm’s rapidly expanding AI team. Manus staffers have already moved into Meta offices in Singapore, while existing investors including Tencent Holdings Ltd., ZhenFund and Hongshan have received their proceeds, according to people familiar with the matter. The people spoke on condition of anonymity to discuss a private transaction.Meta said in a statement that the deal complied with applicable laws and it expected a resolution to China’s investigation, without elaborating.Beijing and Washington are jockeying for leverage ahead of their historic meeting in May. As rivalry heats up in the AI space, Xi is trying to both fence off China’s top technology and talent from the US with the Manus move, while underscoring his growing confidence in homegrown chips.The latter point was on display last week when DeepSeek unveiled its V4 model that boasts deeper synergy with Huawei Technologies Co. chips. That high-profile release looked timed to project confidence ahead of Trump’s visit.“Beijing likely views this move as a justified tit-for-tat and mirroring of the export controls, investment restrictions, and counter-tech transfer probes by American authorities over the years,” said Brian Wong, an assistant professor at the University of Hong Kong.Beijing’s agencies have since moved to discourage a repeat of the Manus maneuver, which was completed with unusual speed. The buyout triggered a Beijing probe into illegal foreign investment and tech exports shortly after its December announcement. Agencies including the National Development and Reform Commission have told key AI firms including Moonshot AI and Stepfun in recent weeks they should reject capital of US origin in funding rounds unless explicitly approved, Bloomberg News reported last week. Regulators have also decided on similar restrictions for ByteDance Ltd., the owner of TikTok and the most valuable startup in the country.Those restrictions risk further isolating China’s recovering tech sector from the venture backing that has underpinned it for two decades, much of which was sourced from American pensions and endowments. It follows Beijing’s decision to restrict “red chips” — a type of Chinese company incorporated overseas — from seeking initial public offerings in Hong Kong, threatening to upend a decades-old playbook that helped Chinese companies tap foreign capital by floating overseas..The overarching intent of the restrictions is to prevent US investors from taking stakes in sensitive sectors where national security is a priority. The twin moves suggest that regulators are worried about a leakage of homegrown technology abroad as Chinese-founded startups and companies explore international opportunities. In the wake of the Manus acquisition, many academics decried the loss of a valuable asset to the US. Many worried that the deal would encourage other startups to follow suit.Launched in March 2025, Manus is a general AI agent capable of automating complex tasks, ranging from S&P 500 analysis to drafting sales pitches. A month later, its parent Butterfly Effect raised $75 million in a round led by Silicon Valley’s Benchmark, valuing it at $500 million. The investment triggered a probe by the US Treasury over potential violations of restrictions on investments in sensitive technologies.In July, Manus relocated its China-based staff to Singapore, cutting dozens of roles in the process. Meta announced its acquisition in December after Manus surpassed $100 million in annualised revenue.It remains unclear what other action Beijing will take following its investigation. Manus co-founders Xiao Hong and Ji Yichao had been barred from leaving China, the Financial Times reported in March..© 2026 Bloomberg L.P.

BN portfolio: China halts Meta’s $2 billion Manus AI deal, escalating tech tensions

Key topics:

Related Stories