Key Facts
Meta has begun dismantling its $2 billion acquisition of Manus, the Chinese-founded AI startup, following a divestiture order from Beijing on national security grounds. The company has cut Manus off from its internal systems, halted data sharing, and prevented employees from using Manus tools for internal projects, according to a Bloomberg report.
The move comes roughly two months after Chinese regulators ordered the separation, citing potential violations of technology export controls and foreign investment rules. Manus, which drew attention with a viral AI agent demo, relocated its staff to Singapore in mid-2025 before announcing the Meta acquisition in December.
Details of the Separation
Meta's operational separation includes cutting Manus off from internal systems, effectively ending the integration that was supposed to be a landmark exit for Chinese AI. The two companies are moving toward a full separation, with Meta no longer allowing employees to use Manus tools for internal projects.
Meanwhile, Manus co-founders have held preliminary discussions about raising approximately $1 billion from outside investors to reclaim the startup from Meta. This could pave the way for a Chinese joint venture structure and an eventual listing in Hong Kong, a venue that has seen a surge in AI listings this year for Chinese AI startups like MiniMax and Zhiphu.
Impact on the AI Sector
The unraveling of the deal underscores Beijing's determination to retain control over strategically sensitive technology, regardless of a company's offshore incorporation. Chinese authorities have also expanded travel restrictions to researchers and executives at private firms, requiring government approval before heading abroad.
China is tightening its grip on foreign capital, with reports indicating that top AI firms, including Moonshot AI, StepFun, and ByteDance, will need government sign-off before accepting U.S. investment. This adds another layer to Beijing's sweeping effort to control its AI sector.
What Readers Should Know
Despite the separation, Manus has continued to ship new features, rolling out integrations with Similarweb and Shopify. The startup's Chinese origins with parent company Butterfly Effect drew scrutiny on both sides of the Pacific, with U.S. Senator John Cornyn questioning whether American capital should flow to a Chinese-linked firm.
Manus investors, including California-based venture firm Benchmark, have already received their proceeds from the acquisition, while Asian backers, including Tencent, HSG, and ZhenFund, have indicated they will cooperate with the unwinding process, according to the WSJ.
FAQ
- Why is Meta dismantling its Manus acquisition? Meta is complying with a Beijing-issued divestiture order on national security grounds, which requires the company to separate from the Chinese-founded AI startup.
- What steps has Meta taken so far? Meta has cut Manus off from its internal systems, halted data sharing, and prevented employees from using Manus tools for internal projects.
- What are Manus co-founders planning? They have held preliminary talks to raise about $1 billion from outside investors to reclaim the startup, potentially leading to a Chinese joint venture and a Hong Kong listing.
- How are investors affected? US-based Benchmark has received proceeds, while Asian backers like Tencent, HSG, and ZhenFund have agreed to cooperate with the unwinding process.