Meta has started to dismantle its $2 billion acquisition of Manus, a Chinese-founded AI startup, in response to Beijing’s demand for the deal to be unwound. The move is seen as a significant step towards complying with the divestiture order issued by Chinese authorities on national security grounds.
According to Bloomberg, Meta has cut off Manus from its internal systems, preventing employees from using Manus tools for internal projects. This operational separation marks the most concrete step yet in the unwinding process. The two companies are moving towards a full separation, with data sharing between them halted.
The co-founders of Manus have reportedly held preliminary discussions about raising approximately $1 billion from outside investors to reclaim the startup from Meta. This move could pave the way for a Chinese joint venture structure and an eventual listing in Hong Kong, which has seen a surge in AI listings this year for Chinese startups like MiniMax and Zhipu.
The forced divestiture underscores Beijing’s determination to retain control over strategically sensitive technology, regardless of a company’s offshore incorporation. In addition to the unwinding of the Manus deal, Chinese authorities have expanded travel restrictions to researchers and executives at private firms, requiring government approval before heading abroad.
China is also tightening its grip on foreign capital, with reports indicating that top AI firms will need government sign-off before accepting U.S. investment. This adds another layer to Beijing’s sweeping effort to control its AI sector.
Despite the unwinding of the deal, Manus has continued to ship new features, including integrations with Similarweb and Shopify. The startup drew widespread attention with a viral agent demo and relocated its staff to Singapore in mid-2025 before announcing a $2 billion acquisition by Meta in December.
Chinese regulators scrutinized the transaction earlier this year, citing potential violations of technology export controls and foreign investment rules. 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.
The Manus deal’s collapse highlights the complexities of cross-border deals in the AI sector. The involvement of both Meta and Manus raises questions about the role of American capital in supporting Chinese-linked firms.
### What’s Next for Manus?
As the unwinding process continues, it remains to be seen what will become of Manus’ operations and its employees. The startup’s co-founders may explore alternative funding options to reclaim the company from Meta.
The collapse of the deal also underscores the challenges faced by AI startups in navigating complex regulatory environments. As Beijing tightens its grip on foreign capital, it remains to be seen how this will impact the development of the Chinese AI sector.
### Conclusion
Meta’s decision to unwind its $2 billion acquisition of Manus marks a significant step towards complying with Beijing’s demand for the deal to be unwound. The collapse of the deal highlights the complexities of cross-border deals in the AI sector and underscores Beijing’s determination to retain control over strategically sensitive technology.
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