'Draconian development' in Meta-Manus deal draws the line in China's AI race with the U.S.

Chinese authorities on Monday demanded that parties involved with the transaction withdraw, just months after launching a probe. It was not immediately clear how the unwinding process would proceed.Analysts said the decision could serve as a signal to founders about relocating sensitive technology overseas."More than the models and AI agents, China is most concerned about whether China-origin strategically sensitive technologies — and the data and talent behind them — are effectively transferred offshore by corporate restructuring in Singapore," said Winston Ma, adjunct professor at NYU School of Law."The most complex aspect of this deal unwinding in the digital world is the data reversal," Ma said, noting it's much more challenging than reversing a physical goods transaction. A Meta spokesperson told CNBC that the transaction "complied fully with applicable law. We anticipate an appropriate resolution to the inquiry." Manus did not immediately respond to a CNBC request for comment."The practical reality is China has no leverage over Meta," said Gary Dvorchak, Blueshirt Group managing director. The Facebook parent's social media platforms are blocked in China by an internet firewall.Compared with its business in the European Union, Meta "makes nothing in China," which means the company could ignore Beijing and proceed with the deal, Dvorchak said. But Beijing could disrupt Manus' operations, making the startup "essentially worthless to Meta if they merge," he added. Meta disclosed that about 11% of its revenue in 2024 came from China, but did not share those figures in 2025. Europe accounted for more than 20% of Meta's revenue in 2024 and 2025.While Meta noted in its 2025 annual report that it generates "meaningful revenue from a small number of resellers serving advertisers based in China," it flagged that regulatory action, including U.S.-China tensions, could be a risk to its financial performance.

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