China’s Ministry of Commerce has initiated a formal probe into Meta Platforms‘ recent $2 billion acquisition of the AI startup Manus. Announced on January 8, 2026, the investigation aims to scrutinize whether the deal complies with China’s stringent regulations on technology exports, outward investments, data transfers, and cross-border mergers and acquisitions. This development comes amid heightened U.S.-China tech rivalries, where AI has become a key battleground for national security and economic dominance.
Manus, the startup at the center of this storm, isn’t your run-of-the-mill AI chatbot. Founded in 2022 by Xiao Hong under the Beijing-based Butterfly Effect (initially tied to the Monica AI platform), Manus emerged as a pioneering “general-purpose” autonomous AI agent. Unlike traditional AI systems that merely respond to queries, Manus is designed to think, plan, and execute complex, multi-step tasks independently, think screening resumes, planning trips, analyzing stocks, or automating workflows. Launched in early 2025, it quickly gained buzz for its ability to “bridge minds and actions,” offering free tiers alongside paid subscriptions that propelled its annual recurring revenue beyond $100 million by late 2025.
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The company’s trajectory took a pivotal turn when it relocated its headquarters to Singapore under Butterfly Effect Pte in the past year, a move that critics have dubbed “Singapore washing.” This strategy, where Chinese tech firms shift operations to neutral hubs like Singapore to facilitate international deals and evade domestic restrictions, has drawn sharp scrutiny from Beijing. Most of Manus’ employees are now based in Singapore, and following Meta’s acquisition announcement in December 2025, the startup discontinued all services and operations within China. Meta, the parent of Facebook and Instagram, framed the $2-3 billion deal as a boost to its AI ecosystem, with no lingering Chinese ownership ties post-transaction.
But China’s regulators aren’t buying the clean break narrative. Ministry spokesperson He Yadong stated that the probe will involve coordination with other departments to assess the deal’s alignment with national laws, emphasizing security as a paramount concern. Experts like Gary Ng, senior economist at Natixis, point out that “any tech transfer that could give the U.S. an edge in competitiveness will be heavily scrutinized.” Similarly, Cui Fan, a professor at the University of International Business and Economics in Beijing, raised questions on WeChat about whether prohibited or restricted technologies were exported without proper licenses.
This isn’t an isolated incident; it fits into China’s broader push for technological self-sufficiency, especially in AI, semiconductors, and data-driven innovations. Beijing has ramped up export controls on advanced tech, mirroring U.S. restrictions on Chinese firms like Huawei and ByteDance. The review, still in preliminary stages, could result in fines, mandated changes, or even an attempt to unwind the deal, though outright blocks are rare in such cross-border scenarios. As one source told the Financial Times, the license requirement could give Beijing leverage to “influence the transaction, including, in an extreme case, trying to force the parties to abandon the deal.”
For Meta, this probe adds another layer of complexity to its global AI ambitions. The company, which remains banned in China behind the “Great Firewall,” has been aggressively acquiring talent and tech to compete with rivals like OpenAI and Google. Yet, deals involving Chinese-origin entities are increasingly fraught, as evidenced by past scrutiny over TikTok’s U.S. operations. Neither Meta nor Manus responded immediately to requests for comment, leaving the tech world watching closely for updates.
Broader industry implications are significant. This case could deter future U.S. acquisitions of Asian AI startups with Chinese ties, potentially fragmenting the global AI landscape further. It also highlights the rise of “regulatory arbitrage” tactics like relocating to Singapore, which has become a hotspot for AI firms seeking to navigate U.S.-China divides. As AI agents like Manus evolve from hype to practical tools, despite some critics calling it “overhyped” for lacking revolutionary breakthroughs, the regulatory spotlight will only intensify.
The Manus deal also signals that Meta, like its competitors, is using M&A as a talent and capability accelerator. In nearly all of Meta’s recent acquisitions, the product was either folded into its ecosystem or shut down as the team integrated, echoing patterns seen across the AI sector.
