Silicon Valley is finding out that AI acquisitions are trickier when they involve China.
China has barred Manus co-founders CEO Xiao Hong and Chief Scientist Ji Yichao from leaving the country, the Financial Times reported on March 25, as regulators investigate whether Meta’s acquisition of the AI startup violated Chinese investment and technology export rules. The two founders, Singapore-based, were summoned to Beijing for a meeting with the National Development and Reform Commission (NDRC) — China’s top economic planning body — and were told upon leaving that they could not exit the country. They can move freely within China, but cannot travel internationally. Manus is now seeking legal and consulting help to navigate the situation. Meta, for its part, stated: “The transaction complied fully with applicable law. We anticipate an appropriate resolution to the inquiry.”
What Is Manus?
Manus launched publicly on March 6, 2025, and caused immediate buzz by positioning itself as the world’s first general-purpose AI agent — a system that doesn’t just answer prompts but independently executes multi-step tasks like market research, coding, data analysis, and travel planning. Built under the parent company Butterfly Effect (also known as Monica.im), it was incubated in China before its founders relocated the headquarters to Singapore in mid-2025 and laid off most of its Beijing staff.
The product backed up its launch hype with benchmarks: Manus reportedly outperformed OpenAI’s Deep Research on the GAIA benchmark, which tests real-world problem-solving. It hit $100 million in annualized recurring revenue eight months after launch, claiming to be the fastest startup ever to do so, with a monthly growth rate of 20–30%. By the time of the Meta acquisition, it had processed over 147 trillion tokens and powered more than 80 million virtual computers.
The Founders
Xiao Hong — known as “Red” in Chinese tech circles — was born in 1992 and studied software engineering at Huazhong University of Science and Technology. He founded his first startup, Nightingale Technology, in 2015, building enterprise productivity tools including a WeChat assistant that reached millions of users. In 2022, he launched Butterfly Effect and built Monica, an AI-powered browser extension aggregating multiple large language models. Ji Yichao, who goes by “Peak,” serves as Chief Scientist; Zhang Tao rounds out the founding team as Product Partner.
Benchmark Capital’s Chetan Puttagunta, who led the startup’s $75 million Series A at a $500 million valuation in April 2025, called the team “one of the greatest technical teams in the world.” Tencent and HongShan Capital (formerly Sequoia China) also participated.
The Meta Deal
Meta announced the acquisition in late December 2025, valuing Manus at $2–3 billion — reportedly completed in roughly 10 days of negotiations. The deal was Meta’s third-largest acquisition after WhatsApp and Scale AI, and was framed as a key move to compete in the rapidly evolving AI agents space — where analysts see the next phase of enterprise AI adoption shifting from experimentation to productive deployment. Manus was to remain a standalone product while its technology was integrated into Meta AI’s consumer and enterprise offerings. Xiao Hong was set to report directly to Meta COO Javier Olivan.
China’s Ministry of Commerce had flagged its intent to review the deal as early as January, citing technology export controls and foreign investment regulations. The exit bans signal the investigation has moved from review to enforcement.
The “Singapore-Washing” Problem
Central to Beijing’s concern is what regulators describe as a deliberate restructuring to sidestep Chinese oversight. Manus wound down its Chinese operations across 2025, relocated its headquarters to Singapore, and laid off around 80 mainland employees — following what had become a widely-used playbook among Chinese tech founders: build in China, reincorporate offshore, then seek a Western exit.
Beijing is invoking the Regulations on Technology Import and Export Administration, which requires government sign-off to transfer technology developed in China — and advanced AI agents appear to fall squarely under that classification. Chinese nationalist media had already called Manus a “deserter” when it relocated; regulators are now treating the move as a potential violation, not just a cultural grievance.
This mirrors China’s long-standing scrutiny of TikTok, which Beijing has cited as a cautionary case of “Singapore-washing” — using neutral offshore domicile to mask Chinese operational origins. The Manus case is being watched closely by Chinese tech entrepreneurs across Singapore, many of whom have relocated on similar logic. The message from Beijing now is clear: Singapore is no longer a clean break.
What’s at Stake
The exit bans introduce risks that weren’t in the original deal calculus. Manus’s founders — its core human capital — are now effectively inaccessible to Meta for integration purposes. In a worst-case scenario, China could use its export control framework to demand the deal be unwound entirely.
Meta’s AI strategy has been aggressive: the company brought in Alexandr Wang as Chief AI Officer after acquiring a 49% stake in Scale AI for $14 billion, and has been poaching researchers from OpenAI, Google DeepMind, and Anthropic at significant cost. The Manus acquisition was meant to give Meta a working blueprint for agentic AI with real revenue — a product that had proven users would pay for it. That thesis is now suspended pending Beijing’s next move.
The broader precedent matters beyond this deal. For any Silicon Valley company looking to acquire Chinese-founded AI talent via an offshore vehicle, the Manus case establishes that Beijing can reach through the corporate structure and hold the founders themselves. That’s a new and significant variable in cross-border AI M&A.