Meta has begun dismantling its $2 billion acquisition of Manus, completing an operational separation from the Chinese-founded AI startup and halting data sharing between the two companies. This is the most concrete step yet toward complying with a divestiture order Beijing issued roughly two months ago on national security grounds.

The move underscores Beijing’s determination to retain control over strategically sensitive technology, regardless of a company’s offshore incorporation. Meanwhile, Manus co-founders have held preliminary discussions about raising approximately $1 billion from outside investors to reclaim the startup from Meta, potentially paving the way for a Chinese joint venture structure and an eventual listing in Hong Kong.

Even as Meta moves to sever ties with Manus, the agentic AI startup has continued to ship new features, rolling out integrations with Similarweb and Shopify. Manus drew widespread attention with its viral agent demo relocated its staff to Singapore before announcing a $2 billion acquisition by Meta in December.

Chinese regulators moved to scrutinize the transaction earlier this year, citing potential violations of technology export controls and foreign investment rules. Investors, including California-based venture firm Benchmark, have already received their proceeds from the acquisition, while Asian backers, including Tencent, HSG, and ZhenFund, have indicated they will cooperate with the unwinding process.

While Manus’ Chinese origins with parent company Butterfly Effect drew scrutiny on both sides of the Pacific, Senator John Cornyn questioned whether American capital should flow to a Chinese-linked firm. Meta and Manus did not immediately respond to a request for comment outside regular business hours.