Meta is reportedly moving to cancel the $2 billion Manus deal following Beijing’s request

Meta has begun unwinding its $2 billion acquisition of Manus, completing an operational separation from the Chinese AI startup and halting data sharing between the two companies. This is the most concrete step yet toward complying with a divestment order issued by Beijing nearly two months ago on national security grounds.

Meta has cut Manus off from its internal systems, preventing employees from using Manus tools for internal projects as the two companies move toward a complete separation, Bloomberg reported.

Meanwhile, according to May reports, Manus’ co-founders have had preliminary discussions about raising nearly $1 billion from outside investors to take the startup back from Meta, a move that could pave the way for a Chinese joint venture structure and an eventual listing in Hong Kong, a place that has seen a surge in AI listings this year for Chinese AI startups like MiniMax and Zhipu.

What was supposed to be a landmark breakthrough for Chinese AI is rapidly unraveling. The move underscores Beijing’s determination to retain control of strategically sensitive technology, regardless of the company’s establishment abroad.

In addition to the forced divestitures, Chinese authorities have since expanded travel restrictions to include researchers and executives at private companies, requiring government approval before heading abroad. China is also tightening its grip on foreign capital, with reports suggesting that major AI companies, including Moonshot AI, StepFun and ByteDance, will need government approval before accepting US investment, adding another layer to Beijing’s sweeping efforts to control its AI sector.

Even as Meta moved to sever ties with Manus, the AI ​​startup continued to ship new features, rolling out integrations with Sameweb and Shopify.

Manus drew widespread attention with a viral demo that moved its employees to Singapore in mid-2025 before announcing a $2 billion acquisition of Meta in December. Chinese regulators moved to scrutinize the deal earlier this year, citing potential violations of technology export controls and foreign investment rules.

Manus investors, including California-based Benchmark, have already received their proceeds from the acquisition, while Asian backers, including Tencent, HSG and ZhenFund, have indicated they will cooperate with the spin-off, according to the Wall Street Journal.

Manos’ Chinese origins with parent company Butterfly Effect have drawn scrutiny on both sides of the Pacific, with Senator John Cornyn questioning whether US capital should be flowing into a company linked to China.

Meta and Manos did not immediately respond to a request for comment outside normal business hours.