China's National Development and Reform Commission (NDRC) has instructed involved parties to retract a December 29 acquisition of the artificial intelligence startup Manus, a move that effectively requires Meta Platforms to unwind its roughly $2 billion takeover. The directive centers on the prohibition of foreign investment in Manus under existing laws and regulations and calls for withdrawal of the transaction.
The case lays bare a familiar tension for Beijing: a desire for domestic technology leaders to succeed on the global stage while retaining control over key assets and talent at home. Manus was founded about a year ago under a Chinese parent by engineers Red Xiao and Ji Yichao and drew international interest for agents capable of executing complex tasks - from travel bookings to spreadsheet management - with limited human intervention.
Manus had already repositioned itself outside China prior to the acquisition. After raising $75 million from U.S. venture firm Benchmark in May 2025, the company closed its China offices, reduced local headcount and shifted its operations to Singapore, where its staff later moved into Meta's offices. Meta announced that Manus would leave China entirely and that there would be no residual ownership there.
Regulators later moved to reassert authority. During the course of the regulatory review, the two co-founders were barred from leaving China, and NDRC's decision now directs that foreign investment in Manus be prohibited and that the acquisition be withdrawn. The state economic planner did not list Meta or other overseas investors by name in its announcement.
The mechanics of undoing the deal are not straightforward. Recovering money from earlier backers such as Chinese technology firm Tencent is one practical complication, while the directive raises questions about whether those prior investments must be reversed in line with the NDRC order. More fundamentally, once personnel, software and intellectual property are absorbed into a larger acquirer, disentangling them becomes increasingly difficult.
Meta has responded by asserting the transaction's compliance with law. In a statement, the company said, "The transaction complied fully with applicable law" and that it expects "an appropriate resolution to the inquiry." How the company and other stakeholders will execute an orderly unwinding under the regulator's instruction remains unclear.
The episode underscores the strategic stakes policymakers attach to advanced AI capabilities. Officials appear to have acted only after Manus had already decamped overseas and been acquired, suggesting the firms value may have been underappreciated until those steps were taken. The dispute is likely to feature in upcoming bilateral discussions between the United States and China, which are scheduled for next month.
For Chinese founders and investors, the Manus case is a cautionary tale. Attempts to relocate people and assets abroad to access international capital or acquirers will face heightened scrutiny and potential reversal. That deterrent effect is significant at a time when financing patterns are heavily skewed: U.S. AI startups raised nearly $270 billion in the first quarter, a sum more than 13 times the amount raised by their Chinese counterparts according to a recent industry report.
Manus both embodies China's ambitions in cutting-edge AI and highlights the limits of those ambitions when regulatory control is reasserted after a cross-border move. How the unwinding of the December 29 transaction unfolds - and the broader implications for investment flows, talent mobility and corporate strategy - will be watched closely by entrepreneurs and investors alike.
Summary
China's NDRC has ordered the withdrawal of a December 29 acquisition of Manus, requiring Meta Platforms to reverse a roughly $2 billion deal after the startup shifted operations to Singapore. The decision raises complex separation challenges and signals tougher enforcement on cross-border exits of AI firms.
Key points
- NDRC directed that foreign investment in Manus be prohibited and ordered the parties to withdraw the acquisition - impacting the technology and investment sectors.
- Manus had moved operations to Singapore after closing China offices and raising $75 million from Benchmark in May 2025, and Meta said Manus would exit China entirely.
- The decision complicates capital recoveries from earlier backers and highlights difficulties in disentangling personnel, code and IP once integrated into a large acquirer.
Risks and uncertainties
- Execution risk - unwinding a $2 billion acquisition that involved personnel relocations and integration raises operational and legal challenges for the acquirer and investors; this mainly affects technology, legal and financial services sectors.
- Investment deterrence - the ruling signals greater regulatory scrutiny of cross-border exits, which could reduce appetite among founders and investors for overseas capital, impacting venture capital and startup ecosystems.
- Diplomatic uncertainty - the dispute is likely to surface in upcoming U.S.-China talks, creating further unpredictability for multinational deals in the technology sector.