China has ordered that Meta Platforms’ $2.5 billion acquisition of artificial-intelligence startup Manus be unwound.
China’s National Development and Reform Commission, which has the authority to review foreign investments, said Monday that it has banned the acquisition and ordered it to be rescinded on national security grounds.
Manus has developed an AI agent that can carry out sophisticated tasks such as writing in-depth research reports and preparing presentation slides. Early versions of Manus were created by engineers at Beijing Butterfly Effect Technology, which was founded in China in 2022.
Last year, a Singapore-based entity, also called Butterfly Effect, took over the operations of the AI agent product in markets outside China. Manus later relocated most of its China-based employees to Singapore after receiving investment from a California-based venture-capital firm.
Then, in late December, Meta acquired Manus. Days later, Chinese authorities announced a review of the deal in January, saying that cross-border acquisitions and the export of technology must comply with the law.
Last month, Chinese officials called the two co-founders of Manus—Xiao Hong and Ji Yichao—in to discuss the deal in Beijing. The executives, who currently work for Meta, were later told not to leave the country during the investigation, The Wall Street Journal has reported. Many of Manus’s top executives are Chinese nationals.
According to Chinese law, any foreign investments that may carry a national-security risk may be subject to review by the authorities. Chinese authorities believe they have the power to demand that the deal be unwound because Beijing Butterfly Effect Technology remains a Chinese company.
After the acquisition, Meta said that there would be no continuing Chinese ownership interest in Manus and that the startup would discontinue its China-based services and operations. Manus was working to close Beijing Butterfly Effect Technology, but hasn’t yet done so.
The series of events that culminated in Meta’s purchase of China-originated technology has angered Chinese regulators. They are worried that the steps Manus took would spur other Chinese companies to follow suit and move out of China without Beijing’s approval.
The inquiry into the Manus sale reflected Beijing’s broader attempts to protect the country’s AI know-how at a time when the U.S. and China are locked in an intensifying technology race. Both countries have tightened export controls, restricted the exchange of tech professionals and curbed cross-border investment.
Meta, Manus and Xiao didn’t immediately respond to requests for comment. Ji couldn’t be reached for comment.
