What just happened? Beijing has blocked Meta's acquisition of Manus, the Chinese-founded AI agent startup it bought in December for more than $2 billion. The National Development and Reform Commission, China's powerful state planner, cited national security concerns and told the companies to cancel the transaction.
The ruling is a major setback for Mark Zuckerberg's increasingly expensive AI ambitions. Manus burst onto the scene early last year after releasing what it described as the world's first general AI agent – software capable of carrying out complex tasks such as research, coding, website creation, and analysis with minimal human input.
The product reportedly drew millions of users within months. Annual recurring revenue passed $100 million by December, an impressive milestone for a company that had launched just eight months earlier.
Meta's plan was to keep the Manus platform running while folding its technology into the company's wider social media and business tools.
Manus co-founder and CEO Xiao Hong, also known as Red, was expected to report to Meta COO Javier Olivan. The acquisition would have given Meta a stronger foothold in the agentic AI race, where OpenAI, Google, and Microsoft have already been pushing hard.
China, unsurprisingly, saw things differently. Manus' parent company, Butterfly Effect, was founded in 2022 and maintained engineering and research operations in Beijing and Wuhan even after moving its headquarters to Singapore.
Regulators reportedly viewed the relocation as an attempt to move valuable Chinese-developed AI technology beyond Beijing's reach before selling it to a US company.
The scrutiny had been building for months. In March, Manus CEO Xiao Hong and chief scientist Ji Yichao were reportedly barred from leaving China while officials reviewed the deal. Sources familiar with the matter said authorities were examining whether the sale violated Chinese export-control and foreign-investment rules.
The move also comes amid broader efforts by Beijing to restrict US capital from entering sensitive technology sectors. Reports last week claimed leading Chinese tech and AI firms, including ByteDance, Moonshot AI, and StepFun, were being told not to accept American investment without approval.
Meta said the transaction complied fully with applicable law and that it expects an "appropriate resolution." Whether that means a legal fight, a renegotiated structure, or a complete collapse of the deal remains unclear.