(Bloomberg) — China has decided to block Meta Platforms Inc.’s $2 billion acquisition of agentic AI startup Manus, a surprise move to scrap a controversial deal that came under fire in the U.S. for leaking the technology.
Most Read from Bloomberg
The National Development and Reform Commission issued a brief statement on Monday and ordered the cancellation of the agreement. The powerful state planner said in a one-line notification that it has been decided to prohibit foreign investment in startups as per laws and regulations, without elaborating.
The decision is likely to send chills through China’s burgeoning AI sector, and comes weeks before a high-profile summit between US President Donald Trump and China’s Xi Jinping. Beijing has tightened its scrutiny of major industry firms after a massive deal was struck. The sale was initially hailed as a template for startups with global aspirations, but domestic critics have lamented the loss of valuable technology to a geopolitical rival.
The founders of Manus had their start in China but moved their headquarters and key staff to Singapore in 2025. It was unclear when it was announced in December whether Beijing would exercise its authority over transactions that technically take place outside its borders.
“The psyche block is a clear moment,” said Kay Yan, a technical analyst at DZT Research in Singapore. “Manus was Singapore-incorporated with founders based here, and it’s still being pulled back. The signal from Beijing is that it doesn’t matter where the legal entity resides.”
Manus’s decree could deal a blow to Meta as it looks to compete in AI against rivals from Microsoft Corp. and Alphabet Inc.’s Google to OpenAI and Anthropic PBC. Manus was supposed to help Meta Leapfrog lead in the hot field of AI agents, or services that use artificial intelligence to execute tasks.
Still, it’s unclear how Meta will unwind the deal. Manus employees have joined Meta, capital has been transferred and executives from the startup have joined the US firm’s rapidly expanding AI team. Manus employees have already moved to Meta offices in Singapore, while investors including Tencent Holdings Ltd, ZenFund and Hongshan have received their proceeds, according to people familiar with the matter. The people spoke on condition of anonymity to discuss a private transaction.
Meta said in a statement that the deal complied with applicable laws and that it expected a resolution to China’s investigation, without elaborating. The company’s shares were little changed after trading began in New York.
Regulators in Beijing have used outside power for years, forcing top executives at companies such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd. to reform their business practices with little resistance.
Perhaps the closest parallel to the Manus move was Beijing’s decision to force its major ride-hailing player, Didi Global Inc., to delist from the New York Stock Exchange after an initial public offering in 2021. Once hailed as the Uber of China, the Beijing-based company has yet to re-list the $7 billion market.
Beijing and Washington are jockeying for leverage ahead of a historic meeting in May. As competition in the AI space grows, Xi is trying to fend off both China’s top technology and America’s talent, while emphasizing his growing confidence in domestic semiconductor development.
The latter point was on display last week when Chinese AI startup DeepSeek unveiled its V4 model that features deep integration with Huawei technology company chips. That high-profile release appears timely to project confidence ahead of Trump’s visit.
Nvidia Corp. is used to train most of the US AI models. It has spent years restricting China’s access to US technology, including chips.
“Beijing sees the move as a justified tit-for-tat of export controls, investment restrictions, and counter-tech transfer investigations by US officials over the years,” said Brian Wong, assistant professor at the University of Hong Kong.
Agencies in Beijing have begun to discourage repeat maneuvers, which were completed with unusual speed. Soon after the announcement, Beijing launched an investigation into illegal foreign investment and tech exports.
Agencies, including the National Development and Reform Commission, have said in recent weeks that major AI firms, including Moonshot AI and StepFon, must deny U.S.-based capital unless they are clearly approved. Regulators have banned ByteDance Ltd., the owner of TikTok and the country’s most valuable startup. have also decided to impose a similar ban.
Those restrictions risk further isolating China’s recovering tech sector from the enterprise support that has sustained it for two decades, much of which came from U.S. pensions and endowments. It follows Beijing’s decision to ban “red chips” — a type of Chinese company incorporated overseas — from seeking initial public offerings in Hong Kong, threatening to upend a decades-old playbook that helps Chinese companies float overseas and tap foreign capital.
The main purpose of the ban is to prevent US investors from investing in sensitive sectors where national security is a priority. The two moves suggest that regulators are concerned about the leakage of indigenous technology abroad as Chinese-founded startups and companies seek international opportunities.
Launched in March 2025, Manus is a generic AI agent capable of automating complex tasks from S&P 500 analysis to drafting sales pitches. A month later, its parent Butterfly Effect raised $75 million in a round led by Silicon Valley’s benchmark, valuing it at $500 million. The US Treasury launched an investigation into possible violations of investment restrictions on investments in sensitive technologies.
In July, Manus moved its China-based staff to Singapore, cutting dozens of roles in the process. Meta announced its acquisition in December when Manus surpassed $100 million in annual revenue.
It is unclear what other actions Beijing will take after its investigation. Manus co-founders Xiao Hong and Ji Yichao were banned from leaving China, the Financial Times reported in March.
Beijing’s move shows how important AI is to China’s technological ambitions, especially against a backdrop of growing strategic competition with the US, said Alfredo Montufer-Helu, managing director of Ankura China Advisors. And just as the U.S. has tried to block China’s access to advanced semiconductors, China is now moving to block American access to AI tech, he said.
“The Chinese leadership understands that AI is a strategic asset,” he said. “And that’s important in terms of who wins the strategic competition with the US.”
–With assistance from Nectar Gann, Mark Bergen, Newley Purnell, Jenny Marsh, Wille Heiskanen, Peter Ellström and Olivia Solon.
(Updates with Monday trading in the eighth paragraph.)
Read more from Bloomberg Businessweek
©2026 Bloomberg LP
