The tech war between Washington and Beijing has a new battleground. China’s Ministry of Commerce has launched a high-stakes investigation into Meta Platforms’ $2 billion acquisition of the AI startup Manus, alleging violations of export control laws. The probe threatens to unravel one of the biggest tech deals of 2026 and signals Beijing’s intent to police the flow of "Chinese DNA" technology to the West.

Manus, officially based in Singapore, was founded by Chinese engineers and originated as the startup Butterfly Effect (Monica.Im). Its flagship product, a "general-purpose" AI agent capable of autonomous coding and research, took Silicon Valley by storm last March. Meta’s acquisition was seen as a coup, giving Mark Zuckerberg a ready-made rival to OpenAI’s latest models.

The "Singapore Washing" Accusation

Chinese regulators argue that Manus is essentially a Chinese entity that "washed" its nationality by relocating to Singapore to evade Beijing’s strict tech export controls. Ministry spokesperson He Yadong stated that the probe will assess whether the transfer of Manus’s proprietary algorithms and talent required a government license.

• The Law: Under regulations updated in July 2025, China requires approval for the export of technologies related to "interactive AI interfaces" and "user profiling." If Manus’s core IP was developed in Beijing or Wuhan (where it still has offices), the sale to Meta could be illegal under Chinese law.
• The Penalty: If found guilty, Meta could face massive fines in China or, more damagingly, be blacklisted from the Chinese market. For Manus’s founders, the stakes are personal; they could face legal action if they return to China.

Meta’s Headache

For Meta, this is a nightmare. The company paid a premium for Manus to fast-track its AI consumer products. If China forces a divestiture or blocks the transfer of code, Meta effectively bought a $2 billion shell. The investigation also complicates Meta’s supply chain, which still relies heavily on Chinese hardware manufacturing.

The probe is a warning shot to other Chinese founders looking to exit to US giants: You can leave China, but your code belongs to the state.