China Blocks Meta's $2.5 Billion Manus AI Acquisition and Advises Chinese AI Firms to Reject US Capital

China's National Development and Reform Commission (NDRC) has ordered the cancellation of Meta Platforms Inc.'s $2.5 billion acquisition of agentic AI startup Manus, a surprise move that seeks to unwind a contentious transaction criticized over potential technology transfer to the United States. The brief notice, issued Monday, stated only that the decision was made in accordance with relevant laws, without further details. The decision comes weeks before a high-profile summit between U.S. President Donald Trump and Chinese President Xi Jinping, casting a shadow over China's fast-growing AI sector. Although the deal was largely completed—Manus employees have already joined Meta, funds transferred, and investors like Tencent, ZhenFund, and Hongshan reportedly received payouts—Beijing's probe into illegal foreign investment and technology exports prompted increased oversight.

In recent weeks, Chinese authorities have instructed key AI firms, including Moonshot AI and Stepfun, to avoid accepting U.S.-origin capital without explicit approval, with similar restrictions applied to ByteDance. These measures risk further isolating China's tech sector from foreign venture capital, historically dominated by American investors. The steps follow Beijing's earlier restrictions on 'red chip' companies from Hong Kong listings, disrupting a key funding channel. Regulators appear intent on preventing U.S. investors from gaining stakes in sensitive sectors. Manus, incorporated in Singapore but founded by Chinese entrepreneurs, launched in March 2025 as a general AI agent automating complex tasks like S&P 500 analysis. After raising $75 million from Benchmark in July 2025, the startup shifted staff to Singapore and cut dozens of positions. Meta announced the acquisition in December after Manus reportedly surpassed $100 million in annualized revenue. Unwinding the deal may prove complicated, with co-founders Xiao Hong and Ji Yichao reportedly barred from leaving China.