China blocks and orders Meta to unwind its Manus acquisition

China’s National Development and Reform Commission ordered Meta to unwind its acquisition of Manus, the general-purpose AI agent built by the startup Butterfly Effect, in what lawyers described as the first time Beijing had used its foreign-investment security review to reverse a deal that had already closed.

Meta had announced the purchase in December 2025, paying a reported sum above $2 billion for the company behind one of the year’s most-hyped agent products — a system pitched as taking a single goal and carrying out the intermediate steps itself. By the time the regulator acted, integration was well advanced: press reports said roughly 100 Manus staff had already moved into Meta’s Singapore offices, and the founders, among them Xiao Hong, had taken executive roles. Butterfly Effect had earlier re-domiciled from Beijing to Singapore, but regulators held that its core technology and data had originated in China and that the transaction amounted to an outflow of sensitive AI capability that could not be adequately mitigated.

The NDRC published no detailed reasoning. Meta said the deal “complied fully with applicable law” and that it anticipated “an appropriate resolution”, while analysts read the move as a shift in Chinese oversight from procedural compliance toward a substantive assertion of technology sovereignty — a mirror image of the national-security logic the United States had applied to Chinese investment in American technology.

Coming amid a widening US–China split over AI, the decision established a precedent that a Chinese-founded startup could not simply relocate abroad to escape review, and left one of the sector’s first major agent acquisitions in limbo.