Meta’s $2B Manus Acquisition Unraveled by Chinese Regulators

Meta has officially severed operational ties with Manus, the AI startup it acquired for $2 billion just six months ago. This surprising decision follows a directive from Chinese regulators aimed at addressing violations related to foreign investment and technology exports. The National Development and Reform Commission (NDRC) ordered the reversal in April 2026, marking a significant instance of Chinese authorities dismantling a cross-border acquisition after it was completed.

As of early June, Meta has established a data firewall that prevents Manus staff from accessing its internal systems. At the same time, Meta employees have been directed to stop using Manus tools for internal projects. An internal memorandum has urged staff to transition their work to Meta’s platforms. This operational split signals a notable shift in Meta's strategy and underscores the increasing scrutiny from Chinese regulators on foreign tech firms operating in the country.

The NDRC's intervention arises from concerns that Manus, founded in China and initially developing its AI technology there, was attempting to evade oversight after moving its headquarters and core team to Singapore in 2025. An investigation began shortly after Meta's acquisition was finalized, with co-founders Xiao Hong and Ji Yichao facing restrictions on their movement—a clear indication of Beijing's intent to maintain control over the AI sector.

In response to this upheaval, the Manus co-founders are now considering raising around $1 billion from external investors to facilitate a buyback that would restore their company's valuation to the $2 billion Meta initially paid. However, this effort is complicated by the financial dynamics of previous investors, such as Tencent and ZhenFund, who have already exited their positions, making any potential buyback more challenging.

Despite these obstacles, Manus continues to evolve, with ongoing product updates, including new integrations with platforms like SimilarWeb and Shopify. The demand for AI solutions remains steady, and Manus's ongoing operations indicate that the company is not withdrawing entirely from the competitive landscape.

China's actions reflect a growing trend of regulatory scrutiny over foreign tech investments. As the global AI sector evolves, the implications of this deal reversal may extend beyond Meta and Manus, affecting how international firms navigate the complexities of cross-border technology transactions. The ongoing race in AI innovation, especially between American and Chinese companies, is likely to intensify as each side confronts regulatory frameworks and market strategies.

As Meta recalibrates its approach, the broader implications for AI governance and international collaboration remain uncertain. The competition in AI is heating up, suggesting that this episode is just one of many in the unfolding narrative of technological rivalry.