Deal scrutiny deepens over official fears of strategic tech flowing overseas.
China has restricted two co-founders of Manus from leaving the country as regulators review whether Meta’s $2bn acquisition of the AI agent company violates Beijing’s investment rules.
Manus’s chief executive Xiao Hong and chief scientist Ji Yichao were summoned to a meeting in Beijing with the National Development and Reform Commission this month, according to three people with knowledge of the matter.
They said Xiao and Ji were questioned on potential violations of foreign direct investment rules related to its onshore Chinese entities. After the meeting, the Singapore-based executives were told they were not allowed to leave China because of a regulatory review, while they remain free to travel within the country, two of the people said.
No formal investigation has been opened and no charges have been brought. Manus is actively seeking law firms and consultancies to help resolve the matter, said a person with knowledge of the move.
Manus was founded in China but last year relocated its headquarters and core team to Singapore. Meta acquired it for $2bn at the end of last year. The deal is under regulatory review by China’s Ministry of Commerce for its potential violation of export controls, the FT reported in January.
Further scrutiny of the transaction highlights growing concern about what Chinese leaders have described as “selling young crops” to foreign buyers in strategic areas such as AI. There are also concerns that by moving out of China, Manus bypassed domestic regulation in ways that would encourage other groups to follow.
Manus’s alleged FDI violations are related to Chinese reporting rules after its ownership changed, said the people with knowledge of the case.
While such violations, if confirmed, are unlikely to lead to serious penalties under Chinese law, regulators appear to be seeking ways to intervene over the deal.
An extreme outcome would be to unwind the transaction, one of the people said. Because the deal has been completed and Meta has started integrating Manus AI agent software into its platform, such a settlement would be “messy”, the person said.
Chinese regulators have not decided whether to pursue such a drastic step, the person added. The New York Times first reported that Manus executives are probably restricted from leaving China, without further details.
Manus is operated by Singapore-based Butterfly Effect Pte. Early versions of its product were developed by Beijing Butterfly Effect Technology, which Manus’s founders, including Xiao, set up in 2022.
The Chinese entity retains its onshore registration, as well as its sister company Beijing Red Butterfly Technology and their subsidiaries based in Wuhan.
Manus’s relocation to Singapore followed a financing round led by US venture capital firm Benchmark that prompted inquiries from the US Treasury about new rules restricting American investment in Chinese AI. Its earlier investors include HongShan, Tencent and Zhen Fund.
When Meta’s acquisition was announced in December, the US social media group’s chief AI officer Alexandr Wang said Manus’s 100-strong team strengthened the US tech giant’s expanding ambitions to build a large AI team in Singapore and “amazing” AI products.
A Meta spokesperson said:
“The transaction complied fully with applicable law. We anticipate an appropriate resolution to the inquiry.”
Manus and the NDRC did not respond to requests for comment. Xiao and Ji were contacted for comments.
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Source: Financial Times
