The US-China trade war has reignited with full force, marked by two parallel moves in recent weeks that signal a significant escalation in the artificial intelligence (AI) conflict. In the latest development, China's industry regulator has ordered Facebook-parent Meta to withdraw its $2 billion acquisition of Manus, a Singapore-based AI company with Chinese roots.
China Blocks Meta's Manus Acquisition
China's National Development and Reform Commission (NDRC) issued a statement declaring that the decision to prohibit foreign investment in Manus AI was made in accordance with the country's laws and regulations. The commission added that the parties involved have been instructed to cancel the acquisition transaction. Notably, this directive comes nearly four months after the deal was announced in December 2025.
US Crackdown on Model Distillation
Earlier last week, the US government announced a crackdown on foreign technology companies, specifically targeting China, for allegedly exploiting US AI models through a practice known as model distillation. This move has prompted a response from Beijing.
China Restricts US Capital for Tech Firms
Reports indicate that China plans to restrict its leading technology companies, including top AI startups, from accepting US capital without prior government approval. According to a Bloomberg report, Chinese agencies, including the NDRC, have informed several private companies in recent weeks that they must reject US-origin capital in funding rounds unless explicitly authorized.
Moonshot AI, which is considering an initial public offering (IPO), is reportedly among the firms that received this guidance from China's state planner. Fellow Chinese startup StepFun has also reportedly received similar instructions. The report claims that Chinese regulators have imposed similar restrictions on the country's largest technology companies, including ByteDance, the owner of TikTok and the most valuable startup in China.
The rationale behind these restrictions is to prevent US investors from acquiring stakes in sensitive sectors where national security is a priority. The twin moves suggest that regulators are concerned about the leakage of homegrown technology abroad as Chinese-founded startups and companies explore international opportunities.
Manus: China's Next DeepSeek
Manus was hailed as China's next DeepSeek, with the company claiming its AI agent could perform tasks such as buying property, programming video games, analyzing stocks, and planning travel itineraries. In December 2025, Meta announced its $2 billion acquisition of Manus to bolster its AI development. Manus was originally founded in China but relocated its headquarters and core team to Singapore in 2025, operating under Singapore-based Butterfly Effect Pte.
Meta's chief AI officer, Alexandr Wang, welcomed the acquisition on X (formerly Twitter), stating that Manus's 100-strong team would strengthen the US tech giant's ambitions to build a large AI team in Singapore and create "amazing" AI products.
China Bans Manus Founders from Leaving the Country
Shortly after the acquisition was announced in December, China's commerce ministry launched an investigation into whether the deal complied with local laws. In March, China blocked the founders of Manus from leaving the country, months after the acquisition by Meta. According to a Financial Times report, the scrutiny of the Manus transaction highlights growing concern among Chinese leaders about what they describe as "selling young crops" to foreign buyers in strategic areas such as AI. There are also fears that Manus's relocation to Singapore bypassed domestic regulations, potentially encouraging other groups to follow suit. Alleged foreign direct investment (FDI) violations by Manus are reportedly linked to Chinese reporting rules after its ownership changed.
