The Chinese government has put the brakes on Meta's acquisition of the China-based artificial intelligence (AI) startup Manus.
The Office of Foreign Investment Security Review under the National Development and Reform Commission (NDRC) said on the 27th, "In accordance with the law, we are issuing a decision to prohibit investment in the acquisition of Manus by foreign capital," adding, "We require the parties to withdraw the acquisition transaction."
Authorities did not disclose specific reasons. In a statement on the decision, Meta said, "The transaction complied with applicable laws," and "We hope the Chinese review will be resolved smoothly."
Manus is an AI corporations that spun off in 2022 from the Chinese startup Butterfly Effect. It drew attention with a demo video showing it performing tasks on its own when given commands, and was called the second DeepSeek.
Meta announced in Dec. last year that it would acquire Manus for about $2 billion (about 3 trillion won). Since then, the Chinese government has reviewed whether the transaction falls under technology export controls and has now issued a final decision to prohibit investment. Review outcomes are divided into "approval," "conditional approval," and "prohibition." If a prohibition is issued, even investments already made must dispose of equity or asset within a set period and revert to the state before the investment to eliminate national security impacts.
The market interprets this measure as a warning against Manus. Manus transferred its headquarters to Singapore in June last year, and has been cited as an example of so-called "Singapore washing," in which Chinese corporations establish overseas bases to avoid geopolitical risk. In China, criticism of Manus as a "traitor" has also been raised.
Afterward, the Chinese government said in Jan. that it would examine potential violations of technology export regulations regarding Meta's acquisition of Manus. At the time, He Yadong, Spokesperson for China's Ministry of Commerce, said, "The Chinese government consistently supports corporations in pursuing mutually beneficial multinational operations and international technology cooperation in accordance with laws and regulations," but added, "It should be noted that for activities such as outbound investment, technology export, overseas transfer of data, and cross-border mergers and acquisitions, corporations must comply with Chinese laws and regulations and follow legal procedures."
According to the Financial Times (FT), Xiao Hong, Manus founder and chief executive officer (CEO), and Ji Yichao, chief science officer (CSO), were subsequently placed under exit bans by Chinese authorities. They were reportedly investigated for potential violations of foreign direct investment (FDI) rules in connection with their China-based corporate entity.
The Wall Street Journal (WSJ) called the measure "China's effort to step up oversight of AI technology," noting, "Even though the U.S. government has restricted support for investment in Chinese AI corporations, some Chinese AI startups have continued to see steady inflows of U.S. capital."