China’s National Development and Reform Commission (today, April 27) has officially issued an announcement. The office of the Foreign Investment Security Review Working Mechanism has “made a prohibition on investment decision against the acquisition of the Manus project by foreign investors in accordance with the law and relevant regulations, and requires the parties involved to revoke the acquisition transaction.” This is, since the implementation of China’s “Measures for the Administration of Foreign Investment Security Review,” one of the few cases that has used the highest level of enforcement to impose a “prohibition on investment” and require the revocation of an already completed transaction.
Meta splashes $2 billion to buy the cheapest AI application
Time rolls back to December 29, 2025. Meta announced the acquisition of the China AI agent startup Manus, and market estimates put the price between $2 and $3 billion. Manus is a general-purpose AI developed by Beijing Butterfly Effect Technology Development. After going live on March 6, 2025, it went viral overnight due to an outstanding performance on the GAIA benchmark. It can automatically complete complex tasks such as resume screening, itinerary planning, and stock analysis, with annualized revenue already reaching $125 million. For Meta, which is eager to make up for the shortfall in its AI application layer, this deal seems like a bargain.
(Meta acquires the China AI agent startup Manus—why is this a good deal?)
On X, Menlo Ventures partner Deedy said: “Given that Meta AI has almost no products, this is the cheapest and most suitable option.” He listed eight AI application companies with annual revenue exceeding $100 million: Perplexity, ElevenLabs, Replit, Suno, and others. Their valuations range anywhere from $2 billion to $20 billion. By comparison, Manus’s early round valuation was only $500 million, led by Benchmark, which is “quite pragmatic and worthwhile.”
Meta plans to integrate Manus into its Facebook, Instagram, WhatsApp, and wearable device product lines, serving 3 billion users under the company. CEO Zuckerberg has already announced that within three years he will invest $600 billion in AI infrastructure. This acquisition is viewed as a key step in moving from burning cash to product deployment. Manus co-founder Xiao Hong has publicly stated: “The era where AI can not only talk, but also act and create, is just beginning.”
“Singapore whitening” taken to the extreme: Manus’s path of de-Sinification
The reason Manus can be acquired by a U.S. listed company is that, legally, it is no longer a Chinese company. In June 2025, Manus moved its global headquarters to Singapore. The entity carrying operations was Butterfly Effect Pte Ltd, fully owned by its Cayman Islands parent company. In July, the product withdrew from the Chinese market. In August, the Beijing office emptied; more than 40 core technical employees transferred to Singapore, while about 120 employees remaining in China were laid off.
This set of operations is a typical “Singapore whitening”: by moving the headquarters, technology, and core personnel as a whole to Singapore, it bypasses restrictions from China’s regulators and the U.S.’s restrictions on investment in China AI, and regains access for international capital and U.S. AI chips. Precedents such as Tabcut have already verified that this path is feasible, but Manus took it to the extreme: it completely emptied China operations and left almost no “loopholes” that Chinese regulatory authorities could seize. At least, they thought so at the time.
Beijing’s counterattack: from export-control reviews to banning the founders
January 2026. The Financial Times, citing two people familiar with the matter, reported that China’s Ministry of Commerce has begun assessing the process of Manus’s team and technology moving to Singapore and then being sold to Meta, and whether an export license is required under Chinese law. Although at the time it was still in an initial stage, the signal was already clear: Beijing is prepared to apply pressure on this overseas acquisition and merger using export-control regulations.
(Meta acquisition of China AI startup Manus sparks controversy: Beijing may be involved in export-control review, could become a new geopolitical tech battlefield)
On March 25, after meeting with the National Development and Reform Commission, Manus’s two co-founders Xiao Hong and Ji Yichao were prohibited from leaving China. This means that they effectively became hostage-like pressure points—because even if the acquisition transaction was completed at the Cayman level, and Meta is already a shareholder of Singapore’s Butterfly Effect, the founders themselves are still bound by Chinese law.
(Manus founder restricted by Chinese authorities from leaving the country; Meta’s $2 billion acquisition deal faces review)
On April 2, Beijing’s position became even more explicit: it supports cross-border operations, but only supports cross-border operations that are “consistent with China’s laws and regulations and conducted through proper procedures.” On April 27: the NDRC formally ruled, requiring the revocation of the announcement issued today. This is the endpoint of that timeline—and also the starting point of a new round of legal battle.
There are two core actions in the announcement: one is to issue a prohibition on investment decision; the other is to require the parties involved to revoke the acquisition transaction. Under Article 16 of the “Measures for the Administration of Foreign Investment Security Review,” “prohibition on investment” is the highest-strength enforcement decision under these measures, directly binding the target, assets, and business within China.
But the boundary of how this decision is enforced is exactly the most awkward part of this case. Within China, its effect is clear. Even if Beijing Butterfly Effect Technology Development has reduced its scale as an in-China business entity, and even if it has retained the technology and intellectual property, as well as cross-border payment paths, all of that falls within the effective scope of this decision. If the founders refuse to cooperate, they may face consequences such as asset freezes, extension of restrictions on leaving the country, being placed on a dishonest persons list, and criminal prosecution.
Outside China, however, legal effect is a different matter. Meta is acquiring equity interests in a holding company registered in the Cayman Islands. The entire transaction takes place within the corporate and financial law jurisdictions of Cayman Islands/Singapore/United States. In legal theory, the NDRC’s decision cannot directly order the Cayman courts or Singapore’s ACRA to revoke an equity change that has already been completed. China’s real tool is not to directly revoke the transaction, but to pressure the two “parties involved.”
The founders are Chinese citizens, currently located within China, and have already been barred from leaving. As long as they are the key signatories or cooperating parties required to complete the merger and acquisition for Meta, China can force them to withdraw from the transaction structure. In other words, the legal significance of this announcement is that it is fully valid and takes effect immediately under Chinese law; but whether it can actually make Meta exit the acquisition depends on Meta’s and the founders’ choices in the days ahead.
Meta may issue a public statement in the coming days
As a U.S. listed company, Meta has a disclosure obligation for major uncertain events. In the coming days, it may respond via an 8-K filing or public statement. If Meta refuses to cooperate with the “revocation of the transaction,” it will create a direct legal deadlock between China and the U.S. Whether Xiao Hong and Ji Yichao will be allowed to leave the country, and whether a further formal investigation or criminal proceedings will be initiated, can be used to gauge Beijing’s stance.
But the real key is not the Chinese announcement—it’s the Cayman Islands registry. If the equity structure undergoes substantial changes (for example, Meta refunds the equity or both sides terminate the acquisition agreement), that indicates that the revocation has been substantively established. If the equity structure remains unchanged, it means this ban is effectively constrained in cross-border enforcement.
As of the time of publication, none of Meta, Manus, or China’s Ministry of Commerce has issued a public response to the prohibition on investment decision issued on April 27.
This article Beijing issued a ban order requiring revocation of the transaction! Meta’s $2 billion acquisition of China AI startup Manus falls through first appeared on Chain News ABMedia.
