‘Killing the chicken to scare the monkey’: Why China blocked the Meta-Manus deal
analysis East Asia
‘Killing the chicken to scare the monkey’: Why China blocked the Meta-Manus deal
China on Monday (Apr 27) blocked Meta’s acquisition of AI startup Manus, four months after the deal was sealed. It signals that moving offshore may no longer shield Chinese firms from Beijing’s reach as Sino-US tech rivalry deepens, say analysts.
SHENZHEN: China’s move to block Meta’s acquisition of artificial intelligence (AI) startup Manus is emerging as a test of how far Beijing is willing to extend control over technology it views as strategically Chinese, even after companies move offshore, analysts say.
On Monday (Apr 27), the country’s top economic planner, the National Development and Reform Commission, halted the US$2 billion deal, effectively ordering it unwound four months after it was sealed.
The deal had been completed through a Singapore-registered entity after Manus shifted its headquarters there late last year, yet it still fell within the reach of Chinese regulators.
Experts say the case reflects a broader shift in how Beijing defines its jurisdiction over technology, signalling that relocating offshore may no longer shield Chinese firms if their technology, talent and data remain tied to China.
“Regulators looked straight through (the Singapore holding structure) to the technology’s Chinese origin,” Sebastian Wiendieck, partner and head of the legal practice in China at ROEDL, a law firm, told CNA.
“This marks a new normal: any China-founded AI startup, regardless of its offshore domicile, will face intense national security scrutiny if it tries to sell to a US buyer.”
The case also raises broader questions over whether offshore hubs can continue serving as neutral bases for Chinese firms seeking foreign capital and global expansion amid intensifying Sino-US competition over strategic technologies, legal experts said.
BEIJING TIGHTENS CONTROL
Manus is an AI startup founded by a Chinese team under parent company Butterfly Effect. It built much of its early technology, talent and data capabilities in China before relocating its headquarters to Singapore in 2025, as it expanded overseas.
The company gained global attention after launching a general-purpose AI “agent” in March last year, capable of autonomously planning and executing complex tasks.
In December 2025, Meta agreed to acquire Manus for about US$2 billion - one of its largest deals - aiming to integrate the technology into its platforms. The transaction was structured through a Singapore-registered entity after the company scaled down its China operations.
Four months later, on Apr 27, China’s top economic planner said it had blocked a foreign acquisition of Manus on national security grounds and ordered the deal unwound.
The notice referred to the “acquisition of Manus” but did not identify the buyer, and was widely understood to refer to Meta’s purchase announced in December last year.
Chinese authorities have not detailed the specific reasons for the decision, but an Apr 28 commentary by the People’s Daily, China’s Communist Party’s flagship newspaper, said the move was consistent with international practice in reviewing sensitive cross-border investments and safeguarding strategic technologies.
The commentary also said such reviews are not aimed at restricting foreign investment more broadly, but at defining clearer boundaries for sensitive sectors.
At the heart of China’s decision are concerns over the transfer of Chinese-developed AI capabilities and the risk of foreign control over assets seen as strategically important, analysts said.
“This is core competition,” Alfred Wu, an associate professor at the Lee Kuan Yew School of Public Policy (LKYSPP) in Singapore, told CNA, referring to the intensifying Sino-US rivalry in sectors such as AI.
Wu said Beijing is adopting a targeted approach similar to Washington’s “small yard, high fence” strategy, focusing restrictions on a narrow set of high-value technologies such as AI and robotics that China has deemed important to national security.
Similar restrictions have been seen in the US, where Washington has curbed outbound investment in areas such as AI, semiconductors and quantum technologies.
Wu said that China will not allow foreign investment in sectors it deems critical, adding that the Meta-Manus issue is closely tied to national security and data sovereignty.
“AI … needs to rely on data… what’s important is where the data is coming from, and not where your headquarters are,” he said.
Analysts said China’s latest move is part of a broader tightening of oversight rather than an isolated intervention.
Chong Ja Ian, an associate professor at the National University of Singapore (NUS), said it reflects a broader strategy to strengthen control over key technologies and promote greater self-reliance.
“The control of tech and creating dependencies by the rest of the world is an approach Xi first articulated in 2020. It’s now taking more concrete shape,” he told CNA.
China has carried out earlier interventions in the tech sector, such as a 2021 crackdown on ride-hailing giant Didi shortly after its US listing, which analysts tied to regulators’ brewing concerns over cross-border data flows.
The company later delisted from the New York Stock Exchange and has yet to relist elsewhere.
Last month, the Financial Times reported that Chinese authorities had restricted two Manus co-founders, Xiao Hong and Ji Yichao, from leaving the country during a regulatory review, though officials did not publicly confirm the reports.
Chong added that China’s approach increasingly mirrors that of the US, with both sides tightening controls over the cross-border transfer of technology, talent and investment in sensitive sectors.
“It’s parallel … Beijing and Washington want advantage. What happens to third parties is at best secondary,” he said.
Wu from LKYSPP said China’s move on Manus is intended to send a broader signal.
“It’s like ‘killing the chicken to scare the monkey’,” he said,