Meta has begun dismantling its $2 billion acquisition of Manus, completing the separation of its operations from the China-founded AI startup and ceasing data sharing between the two companies. This is the most concrete step China has taken to comply with the sale order issued about two months ago on national security grounds.
Bloomberg reports that Meta is blocking Manus from its internal systems, preventing employees from using Manus tools for internal projects as part of the two companies’ complete separation.
Meanwhile, according to a May report, Manus’ co-founders had preliminary discussions about raising about $1 billion from outside investors to get the startup back from Meta. It’s a move that could pave the way for a Chinese joint venture structure and eventual listing. Hong Kong has been home to a surge in AI listings by Chinese AI startups such as MiniMax and Zhipu this year.
What was supposed to be a groundbreaking exit for China’s AI is quickly unraveling. The move highlights China’s determination to maintain control over strategically sensitive technologies, regardless of whether the companies incorporate them overseas.
In addition to forced sales, Chinese authorities have since expanded travel restrictions for researchers and executives at private companies, requiring them to obtain government approval before traveling abroad. China is also tightening its controls on foreign capital, with reports that top AI companies including Moonshot AI, StepFun and ByteDance will require government approval before accepting U.S. investments, adding another layer to China’s efforts to control the AI sector.
Even while Meta is cutting ties with Manus, the agent AI startup has continued to roll out new features, launching integrations with Similarweb and Shopify.
Manus attracted widespread attention with a virus agent demo that relocated staff to Singapore in mid-2025, and announced the $2 billion acquisition of Meta in December. Chinese regulators began scrutinizing the deal earlier this year for possible violations of technology export controls and foreign investment rules.
According to the WSJ, Manus investors, including California-based venture firm Benchmark, have already received proceeds from the acquisition, and Asian backers including Tencent, HSG and Genfund said they would cooperate in the liquidation process.
Manus’ Chinese parent company, Butterfly Effect, has drawn scrutiny on both sides of the Pacific, with Senator John Cornyn questioning whether U.S. capital should be flowing into companies with ties to China.
Meta and Manus did not immediately respond to requests for comment outside regular business hours.
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