Meta has begun unwinding its $2 billion Manus contract amid a divestment drive by the Chinese government, a move that complicates foreign investment and AI cooperation.
Meta has begun the process of canceling its $2 billion acquisition of Manas, effectively unblocking its work with the Chinese AI startup and halting data exchange between the two companies. This is the most decisive step yet towards implementing Beijing’s order to divest on national security grounds, passed nearly two months ago.
According to Bloomberg, Meta isolated Manus from its internal systems and prohibited employees from using Manus tools for internal projects during the separation between the companies.
In May, it was reported that Manus’ co-founders were in preliminary talks to raise around $1 billion from outside investors with the aim of bringing Manus back under control of the Chinese company, which could open the door to a joint venture with a Chinese partner or a possible Hong Kong listing.
Background to Beijing’s regulatory pressure
Even if China’s historic rise in artificial intelligence was previously envisioned, that path has quickly become clouded by Beijing’s determination to maintain control over sensitive technology regardless of a company’s registered jurisdiction.
In addition to the forced sale, Chinese regulators have expanded travel restrictions for researchers and private company leaders, requiring government approval for international travel. Authorities are also tightening controls on foreign capital, with reports that leaders of AI companies such as Moonshot AI, Stepfan and ByteDance will require government approval before accepting U.S. investment, adding a new dimension to the Chinese government’s efforts to control the field.
Following its split with Manus, the agent-based AI startup continues to roll out new features and integrate with Similarweb and Shopify.
Manas gained attention after a viral demonstration of its agent-based AI technology, prompting staff to relocate to Singapore in mid-2025 ahead of Meta’s announcement of a $2 billion acquisition in December. Chinese regulators had previously reviewed the deal for possible violations of technology export control rules and foreign investment rules.
Manas investors, including Californian Benchmark, have already received dividends from the acquisition, while Asian backers such as Tencent, HSG and Genfund have said they will cooperate on further steps. The Chinese origins of Manas’ parent company Butterfly Effect have attracted attention on both sides of the Pacific. Sen. John Cornyn questioned whether U.S. capital should flow into China-related structures.
Mr. Mehta and Mr. Manus did not respond to requests outside business hours. In light of regulatory pressures and future responses, both companies remain cautious, but continue to consider transaction moves and disclosures that could impact China’s AI investment environment.
The story highlights the Chinese government’s efforts to control key technologies and could have long-term implications for foreign investment in Chinese AI projects and how Western companies engage with Chinese partners in the future.
This article is written by Kate Park, who focuses on technology, startups, and venture capital in Asia. She previously worked as a financial journalist at Mergermarket, covering mergers and acquisitions, private equity, and venture investing.
Mehta and Manus are open for further comment after the current separation phase is completed, and analysts expect further developments due to regulatory changes and global changes around AI.
In conclusion, it is worth noting that the current transformation team has demonstrated a commitment to maintaining control of key technologies while highlighting the risks and uncertainties of international investment in China’s AI sector in the coming months.
