Meta reportedly begins dismantling $2 billion Manus deal on Beijing's orders

Meta Platforms has begun dismantling its $2 billion acquisition of Manus, according to a Bloomberg report, as the tech giant moves to comply with Beijing's unprecedented order to unwind the deal.

Meta has completed an operational split, ordering its employees to stop using Manus tools for internal projects while blocking the Singapore-based company's staff from accessing Facebook-parent's internal data systems from this month, Bloomberg reported Thursday, citing people familiar with the matter.

The separation comes as Manus and Meta scramble to heed Beijing's demand to dismantle a deal that has become a test case for how far China will go to safeguard its strategic technology and talent.

Chinese regulators in April ordered the deal to be reversed, an unprecedented move under the country's foreign investment security review mechanism that set in motion the intricate process of unraveling a completed deal, according to Zhonglun law firm. 

Beijing has since tightened tech export controls to keep a firmer grip on cross-border transactions, particularly those involving assets in strategic sectors, as the U.S.-China tech race intensifies into a contest over talent, hardware and data.

For U.S. tech firms eyeing Chinese assets, "Chinese-origin AI now carries a kind of reversibility risk that no clever deal structure can price out," said Matthias Hendrichs, a Singapore-based advisor to global AI firms.

For Manus, the problem at the heart of Beijing's objection may not be resolvable, Hendrichs added. "Once another company's engineers have been inside your stack, you can delete the repository, but you can't make them unsee what they've seen."

Once celebrated as a breakthrough for Chinese AI startups taking on American rivals, Manus has become a cautionary tale for entrepreneurs looking to shed their Chinese image by relocating to countries such as Singapore.

"The unwind may be messy," said Han Shen Lin, China managing director at The Asia Group. Beijing has sent a message to its tech sector that the so-called "Singapore washing" has limits, he said, and a lesson to Washington that shining a light on ownership structures may be just as effective as any prohibition.

Manus, with its roots in China, relocated its headquarters and core teams to Singapore last year, before Meta announced to acquire the agentic AI startup for $2 billion in December, triggering a months-long probe involving tech export controls.

Earlier this month, Beijing issued sweeping new rules tightening control of overseas deals involving Chinese investors, technology, data and on national security grounds.

The rules come as Beijing and Washington race to tighten their grip on AI. Chinese regulators have reportedly instructed firms, including Moonshot AI, StepFun and ByteDance to reject U.S. investment without explicit government approval, while Washington recently broadened its AI chip export controls to China-headquartered firms globally. 

The rules extend Beijing's reach to deals in markets beyond mainland China, including Taiwan, and give it the power to punish foreign firms whose home countries restrict Chinese investment. 

The new outbound investment directives target deals such Manus — a high-profile move that suggested a leading Chinese AI firm was turning away from the domestic market, an example Beijing didn't want others to follow, said Tilly Zhang, an industrial policy analyst at Gavekal Dragonomics.

Beijing's new framework essentially gives the state "a retroactive and forward-looking chokehold" on outbound capital, Han said. "If Chinese money touched a deal ... Beijing can now assert jurisdiction over the exit, the restructuring, or the reinvestment."

The framework, which takes effect July 1, provides for the first time a comprehensive and formalized legal basis for China to force the unwinding of completed overseas transactions. It specifically bans cross-border talent transfers in sensitive sectors without approval.