Expert Close to MOFCOM: Meta–Manus Deal May Have Violated China's Technology Export Controls

The acquisition of Manus by Meta has triggered intense discussion in China. From the structure of the deal, it is evident that this was not an ad hoc transaction but a carefully engineered one, adopting the acquihire model that has become increasingly common in Silicon Valley. The core objective of this structure is straightforward: to avoid antitrust scrutiny and foreign investment security reviews.

The effectiveness of the “acquihire” model lies in its legal form. Strictly speaking, no “acquisition” takes place: the acquirer does not purchase the company, does not obtain equity or control, and the target company formally continues to exist as an independent entity. What actually happens is that the core team moves en masse to the acquiring company, while key capabilities are transferred through technology licensing or cooperation arrangements. As a result, the transaction is legally framed as ordinary commercial cooperation and talent mobility rather than an asset acquisition, meaning that it generally does not require regulatory notification and does not trigger China’s market concentration or foreign investment review thresholds.

In recent years, this structure has been widely used in Silicon Valley’s AI and semiconductor sectors. Meta’s “acquisition” of Alex Wang’s Scale AI and Nvidia’s “acquisition” of Groq are both classic examples. The broader context is that U.S. antitrust standards remain vague, lack hard thresholds such as revenue benchmarks, and allow investigations to be initiated relatively easily. Acquihire structures thus provide a convenient gray zone for compliance.

However, this does not mean that the Chinese government lacks alternative tools to block the transaction—should it choose to do so. Paul Triolo, a leading U.S. expert and long-time China tech policy watcher, has already carried out a detailed analysis of this matter.

Today, Cui Fan, a professor at the University of International Business and Economics, published a commentary on his personal blog arguing that the Manus transaction raises potential violations of China’s technology export control regime.

According to him, even if the transaction entities are located offshore, Chinese regulators are not primarily concerned with “overseas company-to-company transactions.” Instead, their focus is on whether Manus-related technologies were developed within China, whether they fall within the scope of restricted technologies, and whether such technologies were transferred abroad without the required approvals.

If Chinese entities such as Beijing Butterfly Effect remain in existence, and if the technologies they developed or controlled fall within the Catalogue of Technologies Prohibited or Restricted from Export, then the relevant entities and responsible individuals could face administrative penalties or even criminal liability.

“It is quite possible that Chinese regulators are already examining the Meta–Manus transaction, particularly its technology export compliance aspects.” Said Cui.

Cui further argues that the significance of the Manus transaction lies not in the individual case itself, but in what it reveals about structural tensions in China’s economy: weak domestic demand and an underdeveloped financing-and-return mechanism for high-tech innovation are pushing outstanding teams to equate globalization with “de-China-ization.”

Cui stated that, looking ahead, China faces a dual task. On the one hand, it must accelerate improvements to its technology import and export control system, striking a better balance between facilitation and effective regulation. On the other hand, it must build a stronger domestic market and a more efficient investment and financing framework, so that high-tech companies can “go global” without having to sever ties with China, and so that development and security can be genuinely coordinated rather than placed in opposition.

Below is the full translation of Cui Fan’s commentary:

A few days ago, on December 30, 2025, media reports suddenly revealed that Meta had carried out a lightning acquisition of Butterfly Effect, the company behind the well-known emerging AI agent Manus (hereinafter, for simplicity, largely referred to as “Manus”). The news immediately drew intense attention across the global tech community. I have also been following this development closely. In this article, I analyze the transaction primarily from the perspective of China’s technology export control regime.

I. A Special Commercial Transaction Under a Complex Geopolitical Context

On the morning of December 30, Zhang Peng, founder of GeekPark, published an article titled “Manus Joins Meta: A 100x Valuation Increase in One Year—What Did They Get Right?”, reposting Meta’s official announcement of Manus joining the company and offering a business analysis of the move.

On December 31, the Dow Jones Risk & Compliance team released a lengthy analytical article titled “Meta Acquires Chinese AI Company Manus: How Did It Pass Investment Review?”. The article disclosed that “the transaction is reportedly valued at USD 2.5 billion, including USD 500 million in retention incentives for Manus employees.” It further reported that Xiao Hong, co-founder and CEO of Manus, would remain with the company after the acquisition, reporting to Meta’s Chief Operating Officer Javier Olivan, and that other media outlets indicated Xiao would assume a role as a Meta vice president.

It is well known that Manus was first launched in China by Xiao Hong and other Chinese entrepreneurs and engineers. According to the Dow Jones Risk & Compliance article, Manus received a USD 75 million investment led by U.S. venture capital firm Benchmark in April 2025. “Shortly thereafter, the U.S. Treasury Department began reviewing the investment to determine whether it violated regulations prohibiting investments in critical technologies flowing to countries that pose national security risks. However, after Manus relocated its headquarters to Singapore, the issue largely ceased to be a focal point for many White House officials.”

According to media reports, during this period Manus laid off some China-based employees, relocated part of its core team to Singapore, and formally moved its headquarters there. Manus’s website currently shows that its product is unavailable in mainland China. As noted in the Dow Jones article, “Meta spokesperson Andy Stone stated that following the completion of the transaction, Manus would no longer have ongoing Chinese ownership interests and would terminate its services and operations in China.”

The Treasury Department review referenced above was conducted under the U.S. outbound investment control regime targeting sectors such as Chinese semiconductors and microelectronics, quantum information, and artificial intelligence. This mechanism is commonly referred to in the industry as “reverse CFIUS,” although some experts view that label as imprecise. The policy originated with President Biden’s long-anticipated executive order restricting outbound investment to China, signed in August 2023. In June 2024, the Treasury Department issued a Notice of Proposed Rulemaking, followed by the release of final rules in October 2024, which took effect on January 2, 2025.

On December 18, 2025, President Trump signed the FY2026 National Defense Authorization Act, which requires U.S. investments in sensitive Chinese technologies—including semiconductors and microelectronics, AI, quantum computing, high-performance computing, and hypersonic systems—to be reported to the Treasury Department and allows the Department to prohibit or restrict such investments. This elevated outbound investment restrictions from an administrative regime to statutory law.

Against this backdrop, Manus gradually stripped China-related elements from its corporate structure and operations and ultimately pursued this mutual convergence with Meta. Unlike the U.S. government’s forced divestment demand on ByteDance’s TikTok U.S. operations in August 2020, the Meta–Manus transaction was a voluntary business decision driven by commercial considerations. That said, Manus’s step-by-step separation from China was undoubtedly propelled by U.S. outbound investment restrictions. This was a special commercial transaction shaped by complex geopolitics.

Frankly, the extent to which U.S. outbound investment controls could produce such an effect was beyond my expectations. From the Manus team’s perspective, this path may have appeared to be the inevitable price of accessing U.S. capital and achieving further growth. But has the Meta–Manus acquisition truly reached its final chapter? Can relocating to Singapore and abandoning China-based operations fully ensure compliance? What compliance risks remain?

II. Compliance Issues in the Meta–Manus Acquisition

The Dow Jones article states that “after Manus relocated its headquarters to Singapore, the issue largely ceased to be a focus for many White House officials.” Nevertheless, Manus’s China-related elements remain evident.

First, there has been no confirmation that Manus’s core team members have renounced Chinese nationality, nor that they are no longer subject, as natural persons, to Chinese law. Second, according to publicly available Chinese company registration records, Manus’s core team still directly or indirectly owns Beijing Butterfly Effect Co., Ltd. and Beijing Red Butterfly Technology Co., Ltd., the latter being a wholly foreign-owned enterprise invested by entities from Hong Kong, Macau, or Taiwan. Third, Manus’s early technology R&D activities occurred in China, and at least some of the relevant technologies were developed domestically.

Given these factors, U.S. regulators may require further investigation to determine whether the Meta–Manus transaction complies with U.S. outbound investment restrictions. Moreover, U.S. authorities may not yet be able to fully assess how Chinese regulators will view the transaction or assert jurisdiction—an uncertainty that could affect U.S. regulatory conclusions. Even if some U.S. officials welcome the deal, there has been no clear public statement from U.S. regulators endorsing it.

U.S. compliance issues are not the focus here. Instead, the key question is compliance under Chinese law.

Although the full legal structure of the transaction has not been disclosed, it is clear that Meta is not acquiring the China-incorporated entities Beijing Butterfly Effect or Beijing Red Butterfly Technology. But does locating the transaction offshore mean Chinese regulators lack authority? The critical issue is whether any technology subject to China’s export restrictions was transferred abroad without authorization. Under the current Regulations on the Administration of Technology Import and Export, the key inquiry is not whether technology held by Singapore or Cayman entities was transferred to a U.S. entity, but when, how, and which technologies were transferred abroad from China-based entities or individuals.

China last updated the Catalogue of Technologies Prohibited or Restricted from Export on July 15, 2025. Within the restricted category, several items under “Internet and Related Services” and “Software and Information Technology Services” are highly relevant to AI companies. For example, under “Information Processing Technologies,” restricted control points include “data-driven personalized information push services,” encompassing technologies such as large-scale user preference learning through continuous training, real-time preference perception, content feature modeling, preference-content matching, and large-scale distributed real-time computing supporting recommendation algorithms.

If Beijing Butterfly Effect and Beijing Red Butterfly Technology remain active entities, they may no longer be eligible for simplified deregistration. Regulators may investigate whether the technologies they once held fall within restricted categories, and whether, when, and how those technologies were transferred abroad. Unauthorized export of restricted technologies could trigger legal liability.

China’s Foreign Trade Law, recently amended and effective March 1, 2026, as well as its prior version, both impose liability for unauthorized export of restricted technologies, including criminal liability where applicable. The Regulations on the Administration of Technology Import and Export further specify that unauthorized import or export of prohibited or restricted technologies may result in criminal prosecution or administrative penalties. Even where no physical goods or state secrets are involved, violations may still constitute the crime of illegal business operations.

Notably, China’s Criminal Law provides for corporate criminal liability, allowing both fines against entities and criminal punishment of responsible individuals.

III. Further Improvement of China’s Technology Import and Export Control System

Under the current system, Manus’s China-based entities and responsible individuals face potential compliance risks. This leads to a broader question regarding the future direction of China’s technology export control regime.

The Regulations on the Administration of Technology Import and Export were first implemented in 2001 and amended several times thereafter. Given the dramatic changes in the international environment, a major revision is now on the legislative agenda. The State Council’s 2025 Legislative Work Plan lists the Regulations as a preparatory revision item, suggesting that preliminary research is already underway. With the amended Foreign Trade Law taking effect in 2026, conditions are ripe for accelerating revisions to the Regulations.

We expect improvements in at least two areas. First, greater facilitation of technology import and export, potentially through general licenses, conditional licenses, and credit-based management. Second, enhanced regulatory effectiveness, possibly expanding jurisdiction beyond cross-border transfers to include “deemed exports” and “re-exports,” similar to U.S. practice.

U.S. controls increasingly emphasize regulation of individuals and entities, including restrictions on “U.S. persons” supporting advanced semiconductor development in China. Chinese legislators closely observe such practices, and similar concepts may be introduced into China’s regulatory framework.

IV. Concluding Observations

Manus’s team deserves recognition for rapidly developing an internationally influential AI agent. Their aspiration to grow globally amid geopolitical complexity is understandable. However, assuming that swiftly severing ties with China can simultaneously circumvent both U.S. outbound investment restrictions and China’s technology export controls may be overly simplistic.

It is quite possible that Chinese regulators are already examining the Meta–Manus transaction, particularly its technology export compliance aspects. More broadly, the case highlights deeper structural challenges in China’s economy, including strong supply but weak domestic demand. Building a strong domestic market and an effective financing system for high-tech innovation remains essential.

China’s vast pool of STEM graduates underpins both its own development and global progress. Encouraging Chinese companies to go global is important—but so is prudent regulation that balances development and security, ensuring orderly international expansion and mutually beneficial outcomes with host countries.