How Manus went from AI superstar to a geopolitical problem
After months of review, Chinese authorities have decided to stop Meta’s acquisition of Manus, ordering the deal to be reversed over the next few weeks. Lianhe Zaobao China news editor Yang Danxu finds out what this development means and whether such a deal can be undone.
The acquisition of AI start-up Manus by US tech giant Meta — a deal that has gripped the global technology community — has taken a new turn. On 27 April, an administrative order from the Chinese authorities abruptly halted Manus going overseas.
Why Manus left China for Singapore
According to a notice from China’s National Development and Reform Commission, the Office of the Foreign Investment Security Review Working Mechanism has prohibited the foreign acquisition of Manus and ordered the parties to unwind the deal. It is the first publicly disclosed case of a blocked foreign acquisition in the AI sector since China introduced its Measures for the Security Review of Foreign Investment in 2020.
Despite its efforts at China-shedding, Manus could not shake off its “Chinese DNA”.
In March last year, Manus emerged out of nowhere, becoming another China-developed rising star following DeepSeek. As the world’s first general-purpose AI agent, its access codes for its beta testing were at one point pushed up to be worth over tens of thousands of RMB.
After gaining widespread attention, Manus quickly became a hot target for investors. In addition to Chinese backers, Silicon Valley venture capital firm Benchmark led a funding round that raised US$75 million, pushing Manus’s valuation to several hundred million US dollars. However, the investment drew scrutiny from US authorities for potentially violating restrictions on investing in Chinese AI firms, and nearly faced forced divestment, thus accelerating Manus’s move overseas.
In June last year, Manus “cut ties” with China: it relocated its headquarters to Singapore and laid off its China-based team a month later, retaining only 40 core staff who moved to Singapore. Its domestic social media accounts were shut down, and its official website blocked access from Chinese IP addresses.
Despite its efforts at China-shedding, Manus could not shake off its “Chinese DNA”. At the end of last year, Meta officially announced its acquisition of Manus; in January this year, China’s Ministry of Commerce publicly stated that it would begin evaluating the deal; subsequently, Manus executives were placed under exit restrictions, and this week the authorities ultimately scuppered the deal.
The deal was complete — Manus’s executives and core staff had joined Meta, and Meta’s cash had flowed into the pockets of Manus’s early investors. Now, with the administrative order, how is the deal to be undone?
Reversing entangled tech transfer
When news of Meta’s acquisition of Manus broke, many applauded the Chinese-founded start-up for winning the favour of a Silicon Valley giant. Few expected the about-face.
At its core, this was a global capital transaction between a US technology company and a China-founded start-up that had legally relocated overseas. The deal was complete — Manus’s executives and core staff had joined Meta, and Meta’s cash had flowed into the pockets of Manus’s early investors. Now, with the administrative order, how is the deal to be undone?
The Wall Street Journal, citing sources, reported that the Chinese government has given Meta and Manus weeks to unwind the deal and restore Manus’s Chinese assets to their original state, including stripping any previously transferred data or technology from Meta. If Meta proceeds with the reversal, investors such as Tencent and ZhenFund plan to cooperate.
However, while money can be returned and employees can resign from Meta, the core assets of a start-up like Manus lie in its code, models and data. Months after the deal and with technology already transferred, how can such assets realistically be disentangled? What is the use of reversing something that is already done?
Following China’s demand to unwind the deal, some in the tech community joked that Beijing’s intervention might have delighted Meta, which may have been unsure how to back out after paying US$2 billion for Manus, only to find OpenClaw around. Now, complying with regulatory requirements could allow it to recover that “wasted” US$2 billion — what could be better?
The unique technology and first-mover advantage that once set it apart have been diluted; even if it goes back to square one, its value would be significantly diminished.
Geopolitically sensitive area
While meant humorously, that comment reveals the dilemma Manus now faces. Beyond regulatory pressure, even if it manages to extricate itself from the deal, the competitive landscape is now vastly different from that of a year ago.
When Manus first gained prominence, it was virtually the only AI agent on the market. Today, the industry landscape has been transformed. OpenClaw was open-sourced in January this year and quickly swept through the global tech community, eroding Manus’s original market share.
This meant that Manus has gone from being a lone player to being just one among many AI agents. The unique technology and first-mover advantage that once set it apart have been diluted; even if it goes back to square one, its value would be significantly diminished.
How this drama surrounding Meta’s acquisition of Manus will ultimately end remains uncertain. However, one thing is clear: as core technologies become critical bargaining chips in national security and great-power competition, and with China’s rapid technological rise in recent years, Beijing has grown increasingly vigilant about talent outflows and technology transfers.
Manus’s experience shows that offshore “shell” structures — once used by Chinese-incubated companies to achieve cross-border compliance in legal terms — can no longer serve as a reliable shield against regulatory scrutiny or thorough reviews.
For international investors, will future investments in companies founded in China — or with Chinese founders but overseas headquarters — carry additional political risks when it comes to exiting?
In the span of just one year, Manus has found itself squeezed by regulatory pressure from both China and the US as it finds itself right smack in a geopolitically sensitive zone. It is not impossible that, after all this turmoil, it may end up as a fleeting phenomenon in the AI boom.
From the perspective of Chinese regulators, taking a hard line against Manus serves as a warning to others. Yet, it is also worth considering whether such aggressive action may send negative signals.
For international investors, will future investments in companies founded in China — or with Chinese founders but overseas headquarters — carry additional political risks when it comes to exiting? For entrepreneurs, if the domestic start-up environment lacks sufficient appeal and going abroad entails administrative obstacles, should they still choose to start in China? How should the boundaries of national security be defined, and where should the limits of regulation be drawn?
These questions will ultimately affect far more than just Manus: they may shape capital valuations of Chinese tech firms, influence how talent chooses innovation pathways, and even alter global perceptions of China’s openness.
This article was first published in Lianhe Zaobao as “Manus的双重困境”.
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