China’s decision to block Meta-Manus deal shows how far Washington and Beijing are drifting over AI

The move is a headache for Meta, for whom the Manus acquisition, reportedly valued at around $2 billion, was a key element of its new AI strategy. It’s also not clear how Meta can “unwind” the deal: Manus employees had already joined Meta’s AI team, and backers like Tencent and Hongshan Capital had already received their cut of the deal, according to a report from Bloomberg.

The blocked deal also shows how quickly the U.S. and Chinese AI ecosystems are decoupling, as both Washington and Beijing now seek to maintain control of strategic technologies and prevent them from leaking to the other. 

“The transaction complied fully with applicable law. We anticipate an appropriate resolution to the inquiry,” a Meta spokesperson said in a statement.

Investors shrugged off the news, with Meta shares up 0.5% in Monday trading. 

Is Manus a Chinese company? A Singaporean company? Or both?

Manus first grabbed the global spotlight in early 2025 when, in the wake of DeepSeek’s shock to global markets, its parent company—then called “Butterfly Effect”—unveiled an AI agent that its founders promised was “truly autonomous.” 

Then, in July 2025, the company announced that it had moved its office from Beijing in China, where it was founded, to Singapore, a popular destination among Chinese companies trying to distance themselves from their country of origin. Then, six months later in December, Meta announced its acquisition of Manus, and said the startup would shut down its operations in China. 

Chinese authorities quickly said they would review the deal, noting that the startup still relied on Chinese talent and technology. The Chinese government has also barred the two Manus cofounders from leaving China, according to the Financial Times. Beijing routinely bars people subject to potential investigations from leaving the country. 

Several other Chinese companies have tried to establish themselves in Singapore in response to regulatory scrutiny, either from Beijing or Washington. TikTok set up its international headquarters in the Southeast Asian country as it battled threats of a U.S. ban, and fast fashion platform Shein established itself as a Singaporean company as it prepared for a New York IPO. Neither strategy worked: TikTok still had to deal with a ban in the U.S., and Shein has yet to IPO in any jurisdiction, let alone New York.

Manus could have also switched its headquarters to Singapore in response to U.S. regulatory scrutiny. U.S. rules largely bar investment into China’s AI sector. Semafor reported last year that the U.S. Treasury Department was probing a pre-switch Manus funding found that included Silicon Valley firm Benchmark. In addition, becoming a Singaporean company could have helped Manus access advanced AI processors from companies like Nvidia, which are currently subject to U.S. export controls.

An expanding Chinese body of regulation

Beijing has built up an array of legal tools to put pressure on foreign companies, developed in response to American sanctions, export controls and investment bans. (Washington has routinely blocked Chinese investment and acquisitions of U.S. companies)

Chinese officials have previously probed deals involving Intel and Nvidia on antitrust grounds. China has also steadily expanded its own use of export controls, particularly regarding rare earth minerals.

While Manus itself may not have been particularly strategic, Beijing may have felt it needed to take action to oppose the acquisition given the company’s very clear effort at “Singapore-washing.”

Officials have smacked down other companies that criticized or ignored Beijing’s regulatory scrutiny. In 2020, officials derailed the IPO of Ant Group, Alibaba’s finch affiliate, after founder Jack Ma criticized China’s regulatory approach in a public keynote. Then, the following year, Chinese officials announced a data privacy probe of ride-hailing firm Didi just days after its New York IPO, forcing the company to eventually delist. (Together, these two actions sparked a years-long chill in China’s tech sector—a chill that DeepSeek and, ironically, Manus helped to end.)

These problems could get trickier in the future. Bloomberg reported before the weekend that Beijing is considering rules that would require Chinese AI companies to get approval before seeking U.S. investment in funding rounds. The report added that both Moonshot AI, the developer of the large language model Kimi, and ByteDance received warnings. 

A fast decoupling

China’s move puts the country’s AI founders in a bind. If they stay in China, they deny themselves access to U.S. funding and computer chips. But if they redomicile overseas, they invite scrutiny from Beijing if they tap public markets or seek an acquisition. Founders may end up setting up overseas from the get go, whether somewhere like Singapore or in the U.S..

The NRDC’s order also closes off another avenue for U.S.-China engagement over AI, which has proved unable to resist the effect of geopolitics.

Even academic research isn’t safe. In late March, NeurIPS, considered the premier conference for AI research, briefly banned submissions from Chinese companies under U.S. sanctions, citing legal advice that accepting such research could violate U.S. law. Chinese organizations reacted angrily to the move, calling for a boycott. NeurIPS quickly backtracked, blaming a miscommunication with its legal team.

More recently, several U.S. politicians and venture capitalists have criticized Senator Bernie Sanders’s decision to host an discussion with both U.S. and Chinese experts about “the need for international cooperation” regarding the “existential threat” of uncontrolled AI.

Even the prospect of talking to Chinese AI experts—and accepting that there’s a non-U.S. view on things—was too much for some. “It would be like channeling Hugo Chavez to get advice on how to run our economy,” U.S. Treasury Secreary Scott Bessent wrote in a post on X. “The real threat to AI safety is letting any nation other than the United States set the global standard.”