China's National Development and Reform Commission (NDRC) ruled on 27 April that Meta's $2 billion acquisition of Manus, an agentic AI startup founded by Chinese engineers, must be unwound in full. The regulator offered no public justification beyond citing applicable laws and regulations.

The decision is one of the most consequential cross-border deal interventions Beijing has made in the AI sector. Meta announced the Manus acquisition in December 2025, valuing the deal at roughly $2 billion to $3 billion, with the intention of folding Manus's agent technology directly into Meta AI. The move was seen as a significant step in Meta's effort to compete in the fast-growing AI agents market, where rivals such as OpenAI and Anthropic have been building out their own agentic capabilities.

The deal in detail

Manus was founded in 2022 by Xiao Hong, Yichao Ji, and Tao Zhang. Its parent company, Butterfly Effect, was originally established in Beijing before the team relocated headquarters to Singapore around mid-2025. By March 2026, roughly 100 Manus employees had moved into Meta's Singapore offices, with Hong taking on a role reporting directly to Meta COO Javier Olivan, and Ji serving as chief scientist. Meta had also required a full exit from Chinese ownership and operations as a condition of the deal, according to Nikkei Asia.

Despite that restructuring, the NDRC's probe focused on the company's Chinese origins. The regulator's statement said it had "prohibited foreign investment in the Manus project" and required both parties to withdraw the transaction. Meta said in a statement to TechCrunch: "The transaction complied fully with applicable law. We anticipate an appropriate resolution to the inquiry."

The situation is complicated further by reports that Manus co-founders Hong and Ji are subject to exit bans, preventing them from leaving mainland China while the review is ongoing.

What this signals

The NDRC ruling illustrates how Beijing is willing to assert jurisdiction over AI companies that have nominally relocated abroad, particularly where founding teams retain ties to China. It also adds a new layer of geopolitical risk for Western acquirers pursuing deals involving Chinese-origin AI talent or technology, regardless of where those companies are formally incorporated.

In Washington, the deal had already attracted scrutiny. Senator John Cornyn raised concerns about Benchmark's investment in Manus, questioning whether American capital should flow to a firm with Chinese roots.

For Meta, the forced unwind is a setback in a competitive market. The company has not said publicly how it plans to proceed, whether by appealing the decision or pursuing alternative routes to build out its agents capability. The next steps will likely depend on whether the exit bans on Manus's founders are lifted and whether any negotiated resolution with the NDRC proves possible.