Credit: Shutterstock
Beijing just stopped one of the biggest AI deals of the year. And it’s sending shockwaves far beyond Silicon Valley.
China’s most powerful economic regulator stepped in and ordered Meta to unwind its $2 billion acquisition of Manus, an AI startup that had already been absorbed into Meta’s operations. The move is bold, late, and arguably unprecedented. And it tells you a lot about where the US-China tech war is headed.
China’s National Development and Reform Commission (NDRC) ordered the cancellation. The powerful state planner said in a one-line notice that it had decided to prohibit foreign investment in the startup, without elaborating further.
The decision marks an extraordinary late-stage intervention by Beijing, involving two non-Chinese companies. Meta had already begun to integrate Manus software into its own systems by the time the order came.
In other words, the deal wasn’t just announced; it was essentially done. And Beijing still pulled the plug.
If you haven’t heard of Manus, here’s the quick version.
Manus is an autonomous AI agent developed by Butterfly Effect Pte Ltd. It officially launched in March 2025 and was designed to create AI agents capable of operating independently, based on large language models.
Unlike conventional AI systems that wait for your next command, Manus works asynchronously in the cloud. You give it a task, close your laptop, go to sleep, and wake up to completed work.
It made waves in the tech world right from the start. Launched just two months after DeepSeek rattled US markets, Manus was quickly seen as China’s next big AI breakout. Chinese state media celebrated it. Investors rushed in. And then Meta swooped in to buy it.
Meta announced its acquisition in December after Manus had surpassed $100 million in annualized revenue.
Manus was founded in China before relocating to Singapore. Its parent company, Butterfly Effect, raised $75 million in a Series B funding round led by Silicon Valley’s Benchmark Capital in April, valuing it at $500 million. The company relocated its headquarters and core team to Singapore as it pursued global expansion.
For Meta, this was a strategic bet. The acquisition was part of Meta’s costly efforts to catch up with OpenAI and Gemini. The $2 billion deal was announced in December and closed earlier this year.
Manus executives joined Meta, and the company said it would continue operating its subscription service after the acquisition, with Meta integrating its technology into products, including Meta AI.
Everything seemed to be moving forward. Then China got involved.
In January, China’s Ministry of Commerce said it would conduct an assessment and investigation into how the acquisition complied with laws and regulations concerning export controls, technology import and export, and overseas investment.
The core concern was that valuable Chinese-developed AI technology was being handed over to a US tech giant at a time when Washington and Beijing are fighting hard for dominance in the field.
Beijing branded the acquisition a “conspiratorial” attempt to hollow out the country’s technology base.
And the scrutiny wasn’t just talk. In March, Beijing restricted Manus’ two co-founders from leaving the country as the deal was under review.
Can Meta Even Unwind This?
It’s complicated. To undo the deal at this stage, Meta could have to spin off its acquisition to a new buyer, sell it back to its former investors, or find new backers. Any such process would be complex, as Meta has already integrated Manus into some of its tools.
Meta, for its part, isn’t backing down just yet. A Meta spokesperson said, “The transaction complied fully with applicable law. We anticipate an appropriate resolution to the inquiry.”
And the most concerning thing here is that it happened just weeks ahead of US President Donald Trump’s much-anticipated summit with Chinese leader Xi Jinping in Beijing, reinforcing the bifurcation of global technology development as US-China tension heats up.
The US has been restricting the sale of advanced AI chips to China. Now, Beijing is blocking deals going the other direction, too.
For Meta, this is a blow. The company has been spending aggressively to close the AI gap with rivals. For Chinese AI startups dreaming of global acquisition deals, this is a clear warning shot.
But perhaps most importantly, this deal, or rather, the killing of it, tells us something bigger. AI is no longer just a technology race. It’s a geopolitical one. And the rules are still being written in real time.
Don’t expect this to be the last story like this. It’s only going to get messier from here.
