Manus Founder Restricted from Leaving China, Meta's $2 Billion Acquisition Faces Review

Chinese regulators continue their investigation into AI startup Manus, today restricting the exit of its two founders and reviewing Meta’s $2 billion acquisition of the company. This case has drawn widespread attention to the potential exodus of Chinese AI startups and has once again heightened Beijing’s sensitivity to the overseas flow of domestic tech industries.

Manus founders summoned by Beijing authorities, banned from leaving the country

The Financial Times reports that Manus CEO Xiao Hong and Chief Scientist Ji Yichao were summoned earlier this month by Beijing authorities for discussions with officials from the National Development and Reform Commission. Three insiders revealed that the two were questioned about whether their China-based entities violated foreign investment regulations.

After the meeting, the two senior executives, who have previously resided in Singapore, were told that due to ongoing regulatory reviews, they are temporarily prohibited from leaving China but are free to move within the country. Authorities have not yet officially filed a case or made any charges. Manus is actively seeking legal and consulting firms to help resolve the crisis.

From leaving China to Singapore, then being targeted by Meta

Founded in China in 2022 by Xiao Hong and others, Manus’s Chinese entity, Beijing Butterfly Effect Technology, was responsible for developing early product versions. Last year, after completing a funding round led by US venture firm Benchmark, Manus relocated its headquarters and core team to Singapore and rebranded as Butterfly Effect Pte.

At the end of last year, Meta announced it had acquired Manus for $2 billion. Meta AI head and Scale AI founder Alexandr Wang stated that this team of over 100 people would strengthen Meta’s ambitions to develop top AI products in Singapore.

(Meta’s acquisition of Chinese AI startup Manus: Why is this a good deal?)

China’s Ministry of Commerce intervenes, with the worst-case scenario possibly canceling the deal

Chain News previously reported that China’s Ministry of Commerce has begun reviewing the acquisition, focusing on whether the deal violates export control regulations. The National Development and Reform Commission’s involvement further centers on potential violations related to Manus’s Chinese entity failing to report changes in ownership as required.

One insider noted that even if violations are confirmed, current Chinese laws typically impose relatively mild penalties. However, regulators seem to be actively seeking legal grounds for intervention.

Another source indicated that the most extreme outcome could be the cancellation of the entire acquisition. Since Meta has already begun integrating Manus’s AI proxy software into its platform, such a move would make subsequent contract termination highly complex and difficult. It remains unclear whether Chinese regulators will take such a hardline approach.

Meta states that the transaction fully complies with all applicable laws and expects the investigation to be resolved properly.

Beijing sounds alarm on local AI startups: beware of “selling seedlings”

The deeper significance of this case lies in the Chinese government’s heightened vigilance against a phenomenon in strategic sectors like AI—selling early-stage domestic assets at low prices to foreign buyers. Beijing is also concerned that Manus’s move to relocate its headquarters overseas to evade domestic regulation could set a precedent, encouraging more AI startups to follow suit.

This incident may serve as a symbolic warning that the Chinese government will actively intervene in cross-border transactions involving local AI companies to safeguard its strategic position in the global AI race.

This article about Manus founders being restricted from leaving China and Meta’s $2 billion acquisition facing review first appeared on Chain News ABMedia.