China bars foreign investment in Manus AI project as scrutiny on AI exports grows

China’s National Development and Reform Commission (NDRC) today announced that, in accordance with laws and regulations, it has issued a decision prohibiting foreign investment in the acquisition of the general-purpose AI agent project Manus. It also requires the relevant transaction parties to immediately withdraw and cancel all related acquisition activities. This decision marks a key step in China’s regulation of foreign mergers and acquisitions in the technology sector, reflecting its firm determination to safeguard national technological sovereignty and data security. China’s National Development and Reform Commission The Manus project was launched in March 2025 by the Chinese team Monica.im (Beijing Butterfly Effect Technology) and is described by its developer as a general-purpose AI agent. Its core capability lies in autonomously completing complex computer-based tasks within a virtual machine, covering scenarios such as market research, code review, and event planning, while also supporting end-to-end output delivery. However, the cross-border transfer of this technological achievement has drawn significant regulatory attention. According to investigations, Manus’ core technologies were developed in China and involve processing massive amounts of user data. Although its parent company has moved its registered headquarters to Singapore, its China-based affiliated entities—Beijing Red Butterfly Technology and Beijing Butterfly Effect Technology—remain active. The technical origin and domestic entities have not been legally separated. Credit: Manus According to China’s Measures for the Security Review of Foreign Investment, the Catalogue of Technologies Prohibited and Restricted from Export in China, and the Measures for Security Assessment of Data Export, core AI algorithms fall under the category of restricted export technologies. Cross-border transfer therefore requires compliance with technology export licensing procedures and data security assessment requirements. In the Meta acquisition case, the parties involved reportedly failed to follow the legally required procedures for technology export and data outbound transfer declarations, and may have attempted to circumvent regulatory oversight through structural adjustments, thereby triggering the national security review mechanism. The Ministry of Commerce has previously stated that companies engaged in cross-border operations must comply with Chinese laws and regulations and fulfill all statutory procedures. The recent prohibition decision reflects a strict adherence to these compliance boundaries. This case serves as a warning to the AI industry and shows China’s strategic consideration in balancing technological innovation with national security in a globalized context. As major economies worldwide strengthen regulatory scrutiny over cross-border investment in high-tech sectors, China is building a framework for protecting technological sovereignty through improved regulations and enhanced supervision. In the future, technology companies expanding overseas will need to prioritize compliance, balancing commercial interests with national responsibilities in order to maintain stable and sustainable progress in international competition.