Manus Acquisition Blocked

The proposed acquisition of the Chinese AI company Manus's parent company, "Butterfly Effect," by US tech giant Meta has recently been formally blocked by Chinese regulatory authorities. This high-profile AI acquisition completed the entire process from announcement to termination in less than four months.

At the end of December 2025, US tech giant Meta announced its acquisition of "Butterfly Effect," the parent company of Chinese AI startup Manus, for approximately US2billion.Thenegotiationstookonlyalittleovertendays,whichwasoncehailedbythemediaasthe"fastestrecord"foradomesticAIteamtobeacquiredbyamajorcorporation.Ifcompleted,theacquisitionwouldhavebeenMeta′sthirdlargest,followingitsUS2billion.Thenegotiationstookonlyalittleovertendays,whichwasoncehailedbythemediaasthe"fastestrecord"foradomesticAIteamtobeacquiredbyamajorcorporation.Ifcompleted,theacquisitionwouldhavebeenMeta′sthirdlargest,followingitsUS19 billion acquisition of WhatsApp. According to the original plan, after the transaction closed, founder Xiao Hong would become a Vice President at Meta.

However, just days after the announcement, China's Ministry of Commerce made it clear that it would, in conjunction with relevant departments, conduct a compliance assessment and investigation of the transaction in accordance with laws and regulations including the Export Control Law, the Regulations on the Administration of Technology Import and Export, and the Measures for the Security Review of Foreign Investment.

On 27 April 2026, the Office of the Working Mechanism for the Security Review of Foreign Investment, under the National Development and Reform Commission, officially issued an announcement prohibiting this foreign investment and ordering both parties to the transaction to rescind the acquisition. The relevant decision is final and was deemed the most severe level under this review framework.

The regulatory evaluation determined that Manus's core AI capabilities are rooted in China. If acquired by Meta, critical Chinese assets such as core algorithms and user data would inevitably flow overseas, constituting a direct threat to data sovereignty and technological security.

From a legal form perspective, this transaction appeared as a "US company acquiring a Singapore company," but its essence was an attempt by a本土 Chinese AI technology to circumvent the provisions of the Measures for the Security Review of Foreign Investment. The regulatory authorities determined that, without fulfilling the legally mandated Chinese approval procedures, Manus attempted to complete its predetermined goal of being acquired by foreign capital through an overseas entity change, which was essentially an act of evading the security review.

Furthermore, Manus followed a path of "domestic R&D, overseas shell conversion, and foreign acquisition." Manus's core technical team and early R&D were all based in China. However, in the second half of 2025, the company moved its headquarters to Singapore, significantly downsized its domestic team, cleared its social media accounts, blocked IP access from mainland China on its official website, and largely ceased its market operations in China. This maneuver of quickly severing ties with the domestic market after achieving market success was widely interpreted as a "clean-break going global" strategy aimed at evading Chinese regulatory oversight.

The regulatory authorities pointed out that this corporate restructuring, having failed to voluntarily declare and undergo security review procedures, undermined the seriousness of the foreign investment security review system.

Against the backdrop of intensifying global technological competition, control over core technology companies such as AI companies is increasingly being considered at the level of national strategic security to prevent the outflow of key technological assets. This not only sets a benchmark for cross-border M&A in the AI industry but also serves as a warning to other technology companies.