The order, one of Beijing’s strongest moves yet against a foreign purchase of a Chinese tech company, came on Monday from China’s National Development and Reform Commission (NDRC), which said foreign investment in Manus would be prohibited under Chinese law, and the deal must be unwound.

Beijing is now concentrating on AI talent, software and intellectual property, and areas once taken over by chip restrictions now include artificial intelligence, as competition between China and the United States gets stronger

Chinese authorities began examining the acquisition in January, shortly after Meta completed the purchase in December. The review later intensified, and in March, Manus co-founders Xiao Hong and Ji Yichao were reportedly called to Beijing for talks with regulators and then barred from leaving China.

Neither founder publicly responded to requests for comment.

Meta has also not issued a public response.

Manus had drawn attention in China after launching what it described as a general AI agent in 2025. State-backed media had commended the company as a possible successor to DeepSeek, one of China’s most-watched AI firms.

Unlike model developers who build large language systems from scratch, Manus focused on agent software designed to complete multi-step tasks with limited human input. These tasks include coding, research and workflow automation.

Before the takeover, Manus raised $75 million in funding led by Benchmark in May 2025.

The company later shut its China offices and moved operations to Singapore, where its parent company, Butterfly Effect, was restructured. That move was seen as an attempt to attract foreign capital while easing both U.S. and Chinese restrictions.

Chinese regulators now appear determined to challenge that route.

The practice, sometimes called “Singapore washing”, involves Chinese-founded startups shifting legal structures or operations abroad while keeping roots in China. The latest development with Beijing reveals that strategy may no longer guarantee protection from investigations.

Startups moving overseas may not be enough as authorities may now demand proof of where management is headquartered, where research is done, where data is stored and who controls the company’s technology.

The China ruling could also create some problems for Meta, as some Manus staff had already moved into Meta’s Singapore offices, while parts of the startup’s work were reportedly being integrated into Meta projects.

Any reversal may now require separating teams, contracts and technology already tied together.

This is coming weeks before a planned summit in Beijing between U.S. President Donald Trump and Chinese President Xi Jinping in mid-May.

That meeting was expected to cover trade and technology tensions, but this issue now adds another case.

China has previously criticised foreign-linked deals involving strategic assets, but forcing the breakup of a completed transaction is rare.

China does not want core AI assets leaving its reach, no matter where a company later relocates.

The call, which began at 8 a.m. Washington time, was the first direct exchange between the two leaders in three months.

Earlier this year, Washington threatened to shut TikTok down unless its U.S. operations are transferred from Chinese parent company ByteDance to American ownership. 

Congress set a deadline of January 2025, though Trump has so far avoided enforcing it. He has admitted that banning the app outright could trigger a backlash among its millions of American users.

“I like TikTok; it helped get me elected,” Trump said on Thursday. “TikTok has tremendous value. The United States has that value in its hand because we’re the ones that have to approve it.”

Beijing, however, must sign off on any deal before it moves forward. Sources familiar with the talks say U.S. investors would take over TikTok’s American assets, but ByteDance would continue supplying the algorithm that drives the app’s powerful content recommendations. This unsettles U.S. lawmakers who argue that algorithmic control is inseparable from political influence.

“The platform may be American-owned, but if the algorithm is Chinese, the risk remains,” warned Senator Mark Warner, chairman of the Senate Intelligence Committee.

Trade and technology disputes

The TikTok talks are unfolding against a bigger economic fight. Since returning to office, Trump has raised tariffs on Chinese goods, some to levels not seen in nearly a century. Beijing retaliated with its own restrictions, leaving both economies struggling. 

The U.S. is battling high inflation and a record trade deficit with China, while China’s growth slowed to 4.2% in the second quarter of 2025, its weakest pace since the pandemic.

Despite these pressures, Trump insists he is close to securing better terms with Beijing. “We’re pretty close to a deal,” he said on Thursday, hinting at an extension of current trade terms. Washington is pressing China to buy more U.S. soybeans and Boeing aircraft, while also demanding a crackdown on fentanyl-related chemical exports—an issue the U.S. blames for soaring overdose deaths.

TikTok as leverage

Analysts say Beijing is using TikTok as a bargaining chip while holding back exports of rare-earth materials vital for U.S. technology production. “China’s effective use of sticks (rare earths) and carrots (TikTok) has turned things heavily in their favour,” said Scott Kennedy of the Center for Strategic and International Studies.

Washington, in turn, has restricted China’s access to advanced semiconductor designs, jet engines and specialised chemicals.

Political stakes

For Trump, TikTok represents more than a trade issue. It is also a political tool. Banning the platform risks alienating young voters who use it daily. Allowing it to continue under a restructured deal, however, lets him claim a win on national security without losing a vital channel of communication.

Diplomats are already eyeing a possible face-to-face meeting between Trump and Xi at the Asia-Pacific Economic Cooperation (APEC) summit in South Korea next month. Such a meeting could test whether personal diplomacy can ease one of the most fractious U.S.–China relationships in decades.

Liu Pengyu, spokesperson for the Chinese embassy in Washington, said: “Heads-of-state diplomacy plays an irreplaceable role in providing strategic guidance for China-U.S. relations.”

As a sign of goodwill, Beijing recently allowed Wells Fargo banker Chenyue Mao to leave China after months of travel restrictions. Yet even with gestures like this, the unresolved issues—Taiwan, the South China Sea, and competing economic interests—make it obvious that a single phone call will not erase the deep mistrust between Washington and Beijing.