China blocks Meta’s $2 billion acquisition of AI startup Manus

China has officially blocked Meta’s $2 billion acquisition of Manus, a Singaporean AI startup with Chinese roots, dealing a major blow to companies attempting to relocate from China to avoid regulatory oversight from both Beijing and Washington.

The National Development and Reform Commission announced on Monday that it asked both Meta and Manus to withdraw the acquisition transaction, citing compliance with laws and regulations governing foreign investment. Meta had first announced the deal in December 2025.

The decision has sent shockwaves through the tech industry, particularly among venture capitalists and founders who had been betting on the so-called “Singapore-washing” model. This strategy involves Chinese companies relocating to Singapore to sidestep increasing regulatory scrutiny from both Chinese authorities and U.S. lawmakers who have banned American investors from directly backing Chinese AI companies.

Manus represents exactly the type of company caught in this geopolitical crossfire. Originally founded in China before moving to Singapore, the startup develops general-purpose AI agents capable of handling complex tasks like market research, coding, and data analysis. The company launched its first AI agent in March 2024 and quickly gained attention as a potential competitor to DeepSeek, China’s prominent AI company.

The startup’s rapid growth trajectory made it an attractive acquisition target. Manus claimed to have reached $100 million in annual recurring revenue by December 2025, just eight months after launching its product. The company previously raised $75 million in funding led by U.S. venture capital firm Benchmark in April 2024.

For Meta, the acquisition was part of a broader strategy to accelerate AI innovation across its business and consumer products, including its Meta AI assistant. The social media giant had planned to integrate Manus’s advanced automation capabilities into its platform ecosystem.

However, the deal attracted immediate scrutiny from regulators on both sides of the Pacific. In January, China’s Ministry of Commerce launched an investigation into how the acquisition complied with laws governing export controls, technology transfers, and overseas investment. This marked an escalation in Beijing’s efforts to prevent Chinese AI talent and companies from moving offshore.

The blocking of this deal signals several important shifts in the global tech landscape:

• China is tightening control over its AI assets, even those that have relocated offshore
• The “Singapore-washing” strategy may be less effective than companies hoped
• Cross-border AI acquisitions face increasing regulatory hurdles
• The U.S.-China tech decoupling is affecting even indirect business relationships

Meta shares closed 0.53% higher on Monday despite the setback. A company spokesperson maintained that the transaction “complied fully with applicable law” and expressed confidence in finding “an appropriate resolution to the inquiry.”

The intervention has broader implications for the hundreds of Chinese startups that have relocated to Singapore and other jurisdictions in recent years. Many had assumed that changing their legal domicile would provide sufficient distance from Chinese regulatory oversight while maintaining access to global capital markets and customers.

Beijing’s move also reflects its growing concern about brain drain in the AI sector, where top talent and promising startups have been leaving China due to regulatory uncertainty and geopolitical tensions. By blocking this high-profile acquisition, Chinese authorities are sending a clear message that relocating abroad will not necessarily shield companies from Beijing’s influence.

The decision comes at a time when AI has become a central battleground in U.S.-China competition. Both countries view artificial intelligence as critical to future economic and military dominance, leading to increasingly restrictive policies on technology transfers and investments.

For the broader venture capital community, particularly those focused on AI investments, this case serves as a warning about the limits of regulatory arbitrage. The assumption that moving to friendly jurisdictions like Singapore would provide a clean path to U.S. capital and global markets is now being tested by more assertive regulatory intervention from Beijing.