China Blocks Meta’s Acquisition of AI Firm Manus on National Security Grounds
Published 29 April 2026
Yu Du
On 27 April 2026, China’s Office of the Working Mechanism for Foreign Investment Security Review, under the National Development and Reform Commission (NDRC) issued a decision prohibiting Meta’s acquisition of the Manus project and ordering the parties to unwind the transaction.
This is the first publicly disclosed case in which an AI-sector acquisition has been blocked since China introduced the Foreign Investment Security Review Measures in 2020. The decision signals a marked tightening of regulatory scrutiny over cross-border technology transfers amid intensifying U.S.-China tech competition.
Case Background - Rapid Rise and Controversial Exit
Manus rose to prominence in 2025 as a leading AI startup. Often described as the first general-purpose AI agent, it distinguishes itself from conventional conversational tools by autonomously executing complex workflows—such as software development, resume screening, and market analysis—based on a single user instruction.
The company was founded by a Chinese team led by Xiao Hong, a graduate of Huazhong University of Science and Technology, with early backing from domestic investors including Tencent and ZhenFund.
In June 2025, Manus relocated its headquarters to Singapore. It subsequently reduced its China-based workforce, transferred core personnel overseas, shut down domestic social media accounts, and restricted access from Chinese IP addresses. These steps were widely viewed as efforts to distance the company from its Chinese origins in preparation for a foreign sale.
In December 2025, Meta Platforms Inc. announced a US$2 billion acquisition of Manus. By the time of the NDRC’s ruling, the deal had reportedly closed, and Manus’s technology had been integrated into Meta’s advertising systems.
Legal Basis - China’s Security Review Framework
The NDRC’s decision is grounded in the Foreign Investment Security Review Measures (Order No. 37), jointly issued by the NDRC and the Ministry of Commerce (MOFCOM) and effective 18 January 2021. The Measures establish a review mechanism for foreign investments that may affect national security and authorize regulators to block or unwind transactions involving sensitive sectors, including advanced technologies.
1) Scope of Review
According to Article 4 of the Measures, foreign investments must be reported to the Working Mechanism Office if they involve “key technologies” or “critical infrastructure” that impacts national security, especially if the foreign investor obtains “actual control” of the target company.
2) Definition of “Actual Control”
Under Article 4 of the Measures, “actual control” is not limited to majority ownership. It also arises where a foreign investor, despite holding less than 50% of shares, can materially influence corporate decisions, management, finance, or technology through voting rights or other arrangements.
3) Consequences for Closed Transactions
Article 12 of the Measures empowers authorities to prohibit transactions. Where a deal has already been completed, the parties must take necessary measures to restore the pre-investment state. This provision forms the legal basis for unwinding the Meta-Manus transaction.
Beyond the Measures, China’s National Security Law provides a broad legal foundation for protecting critical technologies and sectors. The Regulations on the Administration of Technology Import and Export may also apply, particularly where core AI technologies fall within restricted or prohibited export categories requiring prior approval.
Data-related concerns also fall within China’s broader data governance framework, including the Data Security Law and the Personal Information Protection Law, both of which regulate cross-border data transfers and the processing of sensitive information.
Further, although Manus was legally registered in Singapore, regulators applied a “substance over form” approach. Because the technology was developed in China and the founding team was Chinese, the transaction was deemed to fall within Chinese jurisdiction.
Comment
This case highlights the growing convergence of technology policy, national security, and global capital flows. While the decision underscores China’s determination to safeguard critical technologies, it also introduces greater uncertainty for cross-border investment in high-tech sectors. Its longer-term impact will depend on how regulators apply emerging principles, such as the emphasis on the origin of technology, and whether a balance can be maintained between national security priorities and a predictable, open investment environment.
This is the first publicly disclosed case in which an AI-sector acquisition has been blocked since China introduced the Foreign Investment Security Review Measures in 2020. The decision signals a marked tightening of regulatory scrutiny over cross-border technology transfers amid intensifying U.S.-China tech competition.
Case Background - Rapid Rise and Controversial Exit
Manus rose to prominence in 2025 as a leading AI startup. Often described as the first general-purpose AI agent, it distinguishes itself from conventional conversational tools by autonomously executing complex workflows—such as software development, resume screening, and market analysis—based on a single user instruction.
The company was founded by a Chinese team led by Xiao Hong, a graduate of Huazhong University of Science and Technology, with early backing from domestic investors including Tencent and ZhenFund.
In June 2025, Manus relocated its headquarters to Singapore. It subsequently reduced its China-based workforce, transferred core personnel overseas, shut down domestic social media accounts, and restricted access from Chinese IP addresses. These steps were widely viewed as efforts to distance the company from its Chinese origins in preparation for a foreign sale.
In December 2025, Meta Platforms Inc. announced a US$2 billion acquisition of Manus. By the time of the NDRC’s ruling, the deal had reportedly closed, and Manus’s technology had been integrated into Meta’s advertising systems.
Legal Basis - China’s Security Review Framework
The NDRC’s decision is grounded in the Foreign Investment Security Review Measures (Order No. 37), jointly issued by the NDRC and the Ministry of Commerce (MOFCOM) and effective 18 January 2021. The Measures establish a review mechanism for foreign investments that may affect national security and authorize regulators to block or unwind transactions involving sensitive sectors, including advanced technologies.
1) Scope of Review
According to Article 4 of the Measures, foreign investments must be reported to the Working Mechanism Office if they involve “key technologies” or “critical infrastructure” that impacts national security, especially if the foreign investor obtains “actual control” of the target company.
2) Definition of “Actual Control”
Under Article 4 of the Measures, “actual control” is not limited to majority ownership. It also arises where a foreign investor, despite holding less than 50% of shares, can materially influence corporate decisions, management, finance, or technology through voting rights or other arrangements.
3) Consequences for Closed Transactions
Article 12 of the Measures empowers authorities to prohibit transactions. Where a deal has already been completed, the parties must take necessary measures to restore the pre-investment state. This provision forms the legal basis for unwinding the Meta-Manus transaction.
Beyond the Measures, China’s National Security Law provides a broad legal foundation for protecting critical technologies and sectors. The Regulations on the Administration of Technology Import and Export may also apply, particularly where core AI technologies fall within restricted or prohibited export categories requiring prior approval.
Data-related concerns also fall within China’s broader data governance framework, including the Data Security Law and the Personal Information Protection Law, both of which regulate cross-border data transfers and the processing of sensitive information.
Further, although Manus was legally registered in Singapore, regulators applied a “substance over form” approach. Because the technology was developed in China and the founding team was Chinese, the transaction was deemed to fall within Chinese jurisdiction.
Comment
This case highlights the growing convergence of technology policy, national security, and global capital flows. While the decision underscores China’s determination to safeguard critical technologies, it also introduces greater uncertainty for cross-border investment in high-tech sectors. Its longer-term impact will depend on how regulators apply emerging principles, such as the emphasis on the origin of technology, and whether a balance can be maintained between national security priorities and a predictable, open investment environment.