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.
The Manus AI agent app is displayed on mobile phones with the logo of US tech giant Meta in the app interface, in this illustration picture taken on Apr 28, 2026. (Photo: Reuters/Florence Lo)
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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, referring to a strategy of making an example of one case to deter others as great power rivalry heats up.
OFFSHORE, NOT OFF-LIMITS?
Taken together, analysts said China’s focus is shifting from regulating where companies are based to what they ultimately control.
“This case really undercuts the idea that Chinese companies can get around geopolitics just by moving the legal entity offshore,” Lizzi C Lee, a fellow on the Chinese economy at the Asia Society Policy Institute's (ASPI) Center for China Analysis, told CNA.
She said regulators are increasingly focused on where a company’s “substance” lies - including its founders, talent and core technology.
“If those remain Chinese … the company is still treated as strategically Chinese,” she said.
Wendy Chang, a senior analyst at the Mercator Institute for China Studies, a Berlin-based think tank, said the move marks “a major shift” in Beijing’s attitude towards tech firms seeking foreign funding through offshore setups.
“Beijing wants to make clear … that ‘playing for the other team’ will not be tolerated,” she said.
Legal experts said this is already reshaping how cross-border deals are assessed.
Chung Ting Fai, founder of an eponymous law firm that specialises in intellectual property and business law in both China and Singapore, said Chinese regulators are increasingly focused on the “underlying substance” of the technology, rather than the place of registration.
“That includes where the technology is developed … as well as the data and talent,” he said.
At the same time, the Manus case raises questions about how far such a reversal can go once technology, talent and capital have crossed borders.
China has handed Manus and Meta a preliminary deadline of several weeks to unwind the deal and fully restore Manus’ Chinese assets to their original state, The Wall Street Journal reported on Apr 27, citing people familiar with the matter.
According to the report, this includes stripping any previously transferred data or technology from Meta. Beijing has also considered imposing penalties on Manus and Meta if the deal cannot be fully rescinded, the report said.
“The Manus decision is largely symbolic - unwinding the deal is impractical at this point since capital and technology transfers were complete,” Gavekal Technologies research director Laila Khawaja told Bloomberg News.
“Beijing’s remaining leverage lies in controlling the cross-border movement of Manus executives and potentially forcing their resignations from Meta,” she added.
IMPACTING GLOBAL EXPANSION
Analysts said the implications of the Manus case extend well beyond a single deal, potentially reshaping how Chinese startups raise foreign capital, structure overseas expansions and pursue cross-border acquisitions.
More Chinese technology firms have been eyeing expansion overseas, in a trend known domestically as “going global”, or “chuhai” in Chinese, driven by the search for new markets, capital and technological access.
China’s non-financial outbound direct investment reached US$132.09 billion in the first 11 months of 2025, exceeding the full-year 2024 total, according to official data, underscoring sustained momentum in companies moving abroad.
Offshore hubs such as Singapore have long served as bases for headquarters relocation, centres for deal structuring and gateways to international capital, analysts said.
Data from Singapore’s Economic Development Board shows Chinese companies accounted for 20.6 per cent of fixed-asset investment commitments in 2025, up from 2.5 per cent a year earlier and 2.9 per cent in 2023, highlighting Singapore’s growing appeal as a destination for Chinese firms expanding overseas.
But the Manus case suggests that simply moving a company offshore may no longer be enough, analysts and legal experts said.
Firms could face greater scrutiny from Chinese regulators over the transfer of technology, data and talent. As geopolitical competition intensifies, analysts said the space for cross-border deals - particularly those involving US investors in sensitive sectors such as AI - is narrowing.
“For now, there seems to be some space remaining, but it is diminishing … trying to play all sides may be increasingly difficult, even risky,” said Chong from NUS.
He added that companies are likely to become more cautious in structuring cross-border operations.
“Many will feel compelled to follow the rules … some might find ways of getting around, but those channels will likely have to be more elaborate to avoid trouble,” he said.
At the same time, legal experts said there are already hard limits to what Chinese companies can move offshore.
In an analysis published by Chinese law firm Zhong Lun on its official WeChat channel on Apr 27, lawyers noted that Chinese companies may be able to relocate their legal entities, but “cannot lawfully take core technology assets developed in China out of the country”.
Transferring such technology could be treated as a regulated export under Chinese law.
Political risk consultancy Eurasia Group said the Manus case is likely to reinforce geopolitical concerns around Chinese participation in sensitive technologies.
“This deal will reinforce geopolitical concerns around Chinese participation in sensitive tech, causing tighter FDI (foreign direct investment) screening and export controls in the US and EU (European Union),” Wang Dan, China director at Eurasia Group, told CNA.
“That in turn raises compliance and closing risk premia for cross-border transactions and can narrow offshore fundraising channels for Chinese tech firms in AI, semiconductors and data-heavy sectors, pushing more Chinese startups toward onshore/renminbi or friendly capital instead of dollar or US financing.”
In short, raising money overseas could become more difficult.
Lee from ASPI said the case underscores a broader reality.
“You either need a genuinely internationalised setup … or you stay within China’s regulatory perimeter,” she said.
