The US-China trade war is once again in full swing. There have been two parallel developments in recent weeks that signal a significant escalation in the US-China AI war. In the latest move, China’s industry regulator has asked Facebook’s parent company Meta to back out of a $2 billion acquisition deal for Chinese-owned Manas and a Singapore-based AI company. What makes this even more interesting is that the offer to cancel the deal came almost four months after it was announced, in December 2025. China’s National Development and Reform Commission said in a statement that the decision to ban foreign investment in Manus AI was made in accordance with the country’s laws and regulations. It added that those involved had been told to back out of the acquisition deal.Early last week, the U.S. government announced a crackdown on foreign technology companies that are “misusing” U.S. artificial intelligence (AI) models, known as model distillation, citing China. Current reports say China plans to restrict major technology companies, including top AI startups, from accepting US capital without government approval. The Chinese regulator’s plan is reportedly part of China’s broader response to Metaplatforms’ controversial acquisition of Chinese AI startup Manas. In recent weeks, Chinese authorities, including the National Development and Reform Commission, have instructed private companies to reject U.S.-sourced capital in funding rounds unless explicitly approved, Bloomberg reported. The report cites people familiar with the matter. Moonshot AI, which is considering an initial public offering (IPO), is also reportedly one of the companies receiving guidance from China’s powerful state planners. Fellow Chinese startup StepFun is said to have received similar instructions. The report claims that Chinese regulators have decided to impose similar restrictions on the country’s largest technology companies, including ByteDance, the owner of TikTok and China’s most valuable startup. As for why, the report said the purpose of the restrictions is to prevent U.S. investors from acquiring stocks in sensitive sectors where national security is paramount. Both moves suggest that regulators are concerned about domestic technology leaking overseas as Chinese startups and businesses seek international opportunities. Following the Manus acquisition, many scholars decried the loss of a valuable asset to the United States. Many feared the partnership would encourage other startups to follow suit.
China cancels Meta’s $2 billion acquisition of Manus AI
Manas has been dubbed China’s next Deep Seek, with the company claiming its AI agents can buy real estate, program video games, analyze stocks and plan travel itineraries. In December 2025, Meta announced the acquisition of Manas to strengthen its AI development. Acquired by Meta for $2 billion. Manas was founded in China but moved its headquarters and core team to Singapore in 2025. Manas was later operated by Singapore-based Butterfly Effect. Welcoming Manas’ acquisition, Meta’s chief AI officer Alexander Wang wrote in X that Manas’ 100-person team will strengthen the US tech giant’s expanding ambitions to build a large AI team and “amazing” AI products in Singapore.
China bans Manus AI founder from leaving the country
Shortly after the deal was announced in December, China’s Ministry of Commerce announced it would investigate whether the deal complied with local laws and regulations. In March, a few months after Manas was acquired by Meta, China blocked the startup’s founders from leaving the country. The scrutiny of the Manus deal highlights growing concerns about what Chinese leaders describe as “selling young crops” to foreign buyers in strategic areas such as AI, the Financial Times reported. There are also concerns that by leaving China, Manus may have circumvented domestic regulations by encouraging other groups to follow suit. Manus’ alleged FDI violations are also said to be related to China’s reporting rules following the change in ownership.
