(Bloomberg) — Beijing is deepening an investigation into Meta Platforms Inc.’s $2 billion acquisition of Chinese-founded AI startup Manus, raising the risk that regulators will seek to alter or even unwind the deal if wrongdoing is found.
Chinese officials had begun looking into whether the December takeover of the agentic AI startup violated tech export or national security regulations. The central issue is whether Chinese technology or user data could have been compromised or shared with an American company. Regulators are now also investigating potential violations of rules governing cross-border currency flows, tax accounting and overseas investments, people familiar with the matter said.
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The broadening review highlights the scrutiny surrounding a rare US acquisition for Meta of an Asian tech company — the latest multibillion-dollar bet on AI by Meta co-founder Mark Zuckerberg. Meta hailed the deal, which was struck over roughly 10 days, as an important step toward buttressing its effort to build AI services that can perform tasks for users.
At the same time, it raised questions in Beijing about whether an American firm was gaining control of potentially sensitive, advanced Chinese AI technology and data. Manus’s co-founders and parent company, Butterfly Effect, started operations in China before moving its headquarters and staff to Singapore. Its rapid ascent during that time attracted prominent early US backers including venture investor Benchmark.
The investigation into Meta’s takeover remains preliminary given it closed mere weeks ago, and Beijing could ultimately decide not to take any action. Some officials had privately expressed support for Manus after the deal got announced, according to a different person familiar with the deal. In addition, Manus’s backers have already gotten their money, making it practically difficult to unwind the transaction, the people said.
Still, the deal has raised concerns in China because it marked a major American company acquiring a well-regarded startup of Chinese origin that’s been compared with the likes of OpenAI and DeepSeek. Representatives for Meta and Manus declined to comment. China’s Commerce Ministry didn’t respond to a faxed request for comment.
China’s review has also cast a spotlight on a practice dubbed “Singapore-washing” by the tech industry, referring to companies of Chinese origin that move their base to the city-state as a launchpad for overseas business. The island has proven popular with companies such as Shein because of the predominance of ethnic Chinese familiar with the language.
Manus began to relocate its staff to Singapore from Beijing and Wuhan in July, parting ways with dozens of employees unwilling to move at the time. That decampment caught the attention of Chinese regulators, which privately raised concerns around cross-border data transfers and taxes, according to a person familiar with the matter, who asked to remain unidentified discussing a sensitive issue.
The startup has focused on international markets almost from the outset, and its main agentic AI product has never been available in its country of origin. But one of Butterfly Effect’s previous products — Monica, a Chrome browser extension — is. Regulators didn’t initiate a probe earlier on the presumption that the company would maintain close ties with China, the person said.
Manus captured the attention of investors in March when it released AI agents that help execute tasks for users, including screening resumes, creating trip itineraries and analyzing stocks in response to basic instructions. Its service performed better on some fronts than OpenAI’s Deep Research, the company claimed at the time. Since then, companies from ByteDance Ltd. to Baidu Inc. have followed suit with their own competing agentic AI platforms.
Now, Meta is set to take over the operation, with Manus cutting all ties to China. The US parent intends to continue operating and selling the Manus service while also integrating the technology into its products. Alexandr Wang, Meta’s Chief AI Officer who joined this summer as part of a high-profile investment into his startup, welcomed the Manus team of about 100 staff with a post on X. In his own message on the platform, Manus co-founder Red Xiao said that the deal would help his company expand the reach of its agents.
It isn’t the first time that Manus has found itself a target of politicians. Like DeepSeek, Manus sparked questions about the US lead in artificial intelligence — this time in a product category that American tech companies see as a key investment area. After San Francisco-based venture capital firm Benchmark invested, it drew fire in the summer of 2025 from US lawmakers and other venture investors.
–With assistance from Lulu Yilun Chen, Kurt Wagner, Zheng Wu and Vlad Savov.
