By denying Manus to Mark Zuckerberg, China raises stake in AI war with America

Manus AI, started in China, is one of the hottest AI startups right now. No wonder Mark Zuckerberg snagged it at a whopping price of around $2 billion. But China has said no, and denying Zuckerberg means the country now risks intensifying its AI war with the US.

In Short

• China in March barred Manus AI co-founders from leaving the country
• Now, the country has stopped Mark Zuckerberg from buying Manus
• Manus AI is a hot startup that has done some pioneering work  

Everything is fair in love and AI war. Or so it seems. As the US and China compete with each other in the AI race, they are using all available options to keep their opponent down. The US has banned export of key AI hardware to China and Chinese AI companies. China, meanwhile, is doing its best to hit back. And in the middle of this war, a hot new startup has been caught in the crossfire. Manus AI, a startup that made big buzz last year due to its pioneering AI technology around agents, has been barred from selling itself to Mark Zuckerberg and his company Meta.

While at first glance it may not look like much, read between the lines and you see that Manus AI has become a piece contested between China and America. Both countries want their AI companies to be the best in the world, and consequently both are trying to stifle the competition. Both also see AI as a strategic technology where neither can fall behind, making Manus AI incredibly valuable.

It is probably this value that led Meta CEO Mark Zuckerberg to buy Manus at a whopping price of around $2 billion. Zuckerberg, who is trying to catch up to the likes of OpenAI, Google, or even China’s DeepSeek and Moonshot AI, is snagging all the best AI technologies he can get his hands on. Manus AI, which made some surprising amount of buzz with its agentic AI technology, seemed like an obvious purchase.

Unfortunately, the Chinese government also saw similar value that Zuckerberg saw in Manus. And the government has now blocked the sale. The decision, taken by the country’s top economic body, the National Development and Reform Commission, came weeks after Beijing in March had already barred the Manus co-founders, CEO Xiao Hong and Chief Scientist Ji Yichao, from leaving the country.

First, restrict the founders. Then, block the deal entirely. But what beef does China have against Butterfly Effect, the developer behind Manus AI?

Manus AI considered a strategic company?

Well, it comes down to capability. Manus AI is being seen as one of the most advanced general AI agents available, capable of autonomously executing complex, multi-step real world tasks from end to end with minimal human oversight. Manus AI even outperformed several US-based AI agents on key benchmarks. And in China, it was seen domestically as a potential peer to DeepSeek, making it more valuable to China’s AI ecosystem.

And that, it seems, is precisely the problem.

China does not want a high-performing AI system, built by its own talented people and research, to end up in American hands, especially at a time when the US is acting its arch enemy in the AI race.

You see, right now in this cold war of technology, both the US and China are trying to gain an edge in artificial intelligence. Washington has restricted AI chip exports, curbed research collaborations, and pressured allies such as the Netherlands, Japan, and South Korea to deny access to Chinese companies in various strategic technologies.

Beijing, in turn, is now deploying its own regulatory toolkit to prevent advanced technology and top talent from slipping across the Pacific. The NDRC's decision to block the Meta–Manus deal comes at this particularly tense moment, further raising the stakes.

Manus AI runs away to Singapore

Yes. And that is exactly what shows the seriousness and intensity of the AI war between the US and China.

The co-founders of the company are Chinese nationals, and it was originally launched in 2022 as Beijing Butterfly Effect Technology. However following a $75 million fundraising round led by US venture firm Benchmark in May 2025, the founders chose to relocate the company's headquarters to Singapore and shut down its Beijing offices, laying off dozens of employees in the process.

But the core talent and technological foundation remained closely tied to China.

The move was widely read as a deliberate attempt to distance the company from Chinese regulatory scrutiny and gain easier access to Western investors and Nvidia's AI chips.

This reincorporating in Singapore also allowed Butterfly Effect to sidestep US investment restrictions on Chinese AI firms, as well as Chinese rules limiting the overseas transfer of intellectual property and capital.

By the end of 2025, the company was in advanced talks with Meta for an acquisition valued at roughly $2–3 billion. Meta announced the deal in December 2025, framing it as a means to accelerate AI innovation and embed advanced automation into its consumer and enterprise products, including Meta AI.

Employees move into Meta office

For Meta, acquiring Manus was a shortcut to strengthening its position against rivals like Google and OpenAI, essentially accelerating its AI ambitions. But for China, the deal could have turned into a strategic loss. It didn’t want this breakthrough AI company built on Chinese talent to be passed into US ownership.

Hence, Chinese regulators stepped in and not only blocked the deal but also ordered both sides to unwind the transaction, even though integration had already begun.

Around 100 Manus employees reportedly had moved into Meta's Singapore offices by March 2026. CEO Xiao Hong had taken on a role reporting directly to Meta's COO, Javier Olivan.

Early investors had also received payouts, and the Manus website itself declared the company "now part of Meta." But now this abrupt reversal leaves Meta navigating both operational and regulatory uncertainty, with little clarity on how, or if, the deal can be salvaged.

Given how strongly the US government feels about companies like Meta and its top CEOs like Mark Zuckerberg, the move is also likely to raise temperature in the strategic tussle between China and America. The AI fight between the two countries has only intensified in recent months, as seen by allegations that the US AI companies like Anthropic have levelled against Chinese AI models. They have accused them of “distilling”, or in other words stealing, their AI technology to create Chinese AI models. The Manus move from AI China has potential to add more proverbial “ghee” to this fire.

- Ends