On June 1, 2026, the State Council of the People's Republic of China (PRC) released new Regulations on Outward Investment (Decree No. 837). The regulations impose sweeping scrutiny on outbound investment — broadly defined to capture any company dealing in Chinese-linked assets, goods, technology, personnel, or training — and require government approval across all such activities.
These regulations were adopted by the State Council on April 17, 2026. This was 10 days before the National Development and Reform Commission (NDRC), a ministerial-level body responsible for implementing Chinese Communist Party (CCP) policies and monitoring the impact of global economic engagement on the PRC's economy, ordered U.S.-based Meta to unwind its acquisition of Manus, an autonomous general-purpose AI agent based in Singapore.
The NDRC’s one-sentence decision, which did not reference the outward investment regulations, was the culmination of a three-month investigation and a striking demonstration of Beijing's willingness to assert jurisdiction over a transaction between two non-Chinese entities.
Despite its brevity and deliberate vagueness, the Manus order is an essential lens through which to interpret the practical implications of these new regulations. Together, they signal a new phase in Beijing's extraterritorial ambitions — and for countries such as Canada seeking deeper technological engagement with the PRC, understanding those restrictions is no longer optional.
The deal
Released in March 2025, Manus became an overnight success for its ability to complete complex tasks with minimal human oversight. Initial versions of the ChatGPT-like platform were developed by engineers at Beijing Butterfly Effect Technology Co. Ltd., a startup founded by Chinese entrepreneur Xiao Hong in 2022.
Weeks after its successful launch, Manus secured financing from a U.S. venture firm, Benchmark, and by May 2025 had relocated to Singapore, shuttering its offices and laying off staff in the PRC.
Throughout 2025, Manus was courted by numerous tech companies and partnered with major firms including Microsoft and Stripe. In late December 2025, Meta purchased Manus for a reported US$2.5 billion. The acquisition was reportedly brokered in 10 days and Meta moved swiftly to integrate the technology and Manus’s staff into its operations.
Meta did not challenge the decision and began taking steps to comply with the order.
Just over a week after Meta’s announcement, the PRC’s Ministry of Commerce (MOFCOM) launched an investigation. During the investigation, Manus founders were placed under an exit ban.
On April 27, 2026, the NDRC determined that the deal violated Chinese law. It ordered the transaction unwound within weeks. Meta did not challenge the decision and began taking steps to comply with the order.
While Meta is banned from Chinese markets and has no operations in the PRC, a significant amount of its ad revenue comes from advertisers based in the PRC, which likely explains its acquiescence. However, unwinding the deal is legally complex and carries its own risks. The Outward Investment Regulations, which come into force on July 1, could be applied retroactively; penalties for refusing to comply with an order can lead to fines of up to 10 per cent of the deal value, with relevant employees facing personal fines and potential criminal liability. A potential US$250-million fine is a sharp signal to corporations that remain optimistic about the rewards of commercial engagement with the PRC.
Singapore as an exit strategy
Singapore is a hub for major Chinese firms that have gone global — including ByteDance and Shein — and a common destination for Chinese startups seeking foreign investment looking to “de-China” operations. The practice, known as “Singapore-washing,” has become effectively necessary for companies seeking venture capital and other investment from firms in countries with strict regulations on Chinese companies, particularly the U.S.
Manus followed this playbook. Weeks after raising US$75 million from Benchmark, Manus drew U.S. Treasury scrutiny over its Chinese links, leading Manus to relocate to Singapore. American lawyers argued the structure fell outside Treasury’s review — Manus's parent company, Butterfly Effect, was registered in the Cayman Islands, and Manus’s data was stored outside the PRC.
By the end of 2025, at the time of the Meta acquisition, Manus was fully divested from the PRC and described as a Singaporean company with "Chinese roots." Meta, appearing to rely on the arguments made during the Benchmark investigation, seemingly closed the deal with minimal due-diligence.
That Beijing intervened anyway suggests that “Singapore-washing” is no longer a viable path.
That Beijing intervened anyway suggests that “Singapore-washing” is no longer a viable path for Chinese startups. While some global Chinese firms, including Shein, had voluntarily been reorienting back to the PRC, the Manus decision and new regulations are likely to push startups away from this approach.
This wasn't a data case
Manus was an AI platform trained on Chinese data; the natural assumption was that any regulatory scrutiny would follow a data protection logic — the kind the Cyberspace Administration of China (CAC) had established with Didi in 2021. In that case, the CAC ordered the ride-sharing app to delist from the New York Stock Exchange and pay a fine of 8.6 billion Chinese yuan (C$1.66 billion) for "serious" violations of Chinese data protection and cybersecurity laws. Though framed around data, the political undercurrents suggest Didi was being punished for proceeding with its New York listing despite instructions to wait for a review by Chinese authorities.
In contrast, the Manus investigation was conducted by the NDRC, which has broad authority over macroeconomic and development policy and co-ordinates across ministries, including the Ministry of Commerce. The investigation focused on how the company had been structured and relocated, not on its data. Without expressly identifying the laws violated, the order was understood to fall under the PRC's Measures for the Security Review of Foreign Investment — a regime far broader in scope than data protection or export control rules, covering foreign transactions across industries from agriculture to advanced manufacturing.
The breadth of the NDRC's authority in the Manus decision . . . puts investment activities across any sector at risk of similar review requirements.
The breadth of the NDRC's authority in the Manus decision, along with the new Outward Investment Regulations, puts investment activities across any sector at risk of similar review requirements. In addition, companies and investors focused on data and export control compliance may be looking at the wrong rules entirely. China's legal architecture is a tapestry of overlapping rules, regulations, and edicts — and transactions that appear to clear one regulatory threshold may fall short of another.
Strategic ambiguity remains a feature, not a bug
Similar to other legislation adopted by the PRC — including amendments to the Foreign Trade Law — the Outward Investment Regulations prioritizes national security.
Investigations under the new regulations are initiated at the mere hint of a threat, and departments are instructed to strengthen monitoring and pursue "early detection" of outbound investments. The deliberate breadth of this framework means that risk-averse companies will increasingly seek Beijing's approval before proceeding, rather than risk after-the-fact intervention — and in doing so, these companies hand Beijing control without requiring it to act at all.
The Manus decision marks a turning point in how Beijing projects this leverage abroad — moving from informal pressure toward formal legal mechanisms. Over the last decade, the PRC has built a Legal Great Wall: more than 20 laws and regulations designed to safeguard broadly defined national security interests, many with explicit extraterritorial reach.
Angela Zhang, professor at the USC Gould School of Law, cautions that Beijing's selective use of these tools reflects a "deliberate strategic calculation" rather than a permanent preference for restraint — and that logic has already escalated, from export controls on critical minerals to compelling the unwinding of a deal between two non-Chinese companies.
What makes this current moment notable is not just that Beijing acted, but that both companies complied almost immediately.
What makes this current moment notable is not just that Beijing acted, but that both companies complied almost immediately, without clear legal justification at the time. If Meta — with its resources, lawyers, and lobbyists — did not mount a challenge, what recourse will be available to companies or governments with less leverage?
Timing is not incidental
The NDRC’s order to unwind the Manus deal came weeks before the summit between Chinese President Xi Jinping and U.S. President Donald Trump, which took place in Beijing on May 14–15, 2026. Technology concerns were central to the agenda, and the delegation accompanying Trump reflected the stakes: CEOs from Meta, Nvidia, Micron, Qualcomm, Coherent, Tesla, and Apple were all in attendance.
The Manus order appears to have been a deliberate probe — a test of how Washington would respond before the summit. That chip export controls were not discussed during the summit, and AI featured briefly (and only in the context of safety), likely sent a signal to Beijing that its approach is working.
The Manus order appears to have been a deliberate probe — a test of how Washington would respond.
Most of the companies represented in the U.S. delegation have outstanding disputes with Beijing: Micron has been barred from selling chips for critical infrastructure since a 2023 cybersecurity review, and Qualcomm has been under an anti-monopoly investigation since October 2025. Both investigations are widely regarded as retaliation for U.S. sanctions and tariffs. The Outward Investment Regulations codify this approach, and their release after the summit, following the success against Meta, suggests Beijing is moving with confidence.
Lessons for Canada
As Ottawa recalibrates its relationship with Beijing, these developments are worth considering.
Beijing is pursuing a deliberate strategy, deploying its legal toolkit selectively and facing no meaningful pushback from the world's largest economy and companies.
Beijing is pursuing a deliberate strategy, deploying its legal toolkit selectively and facing no meaningful pushback from the world's largest economy and companies. It has demonstrated it can reach into boardrooms far beyond its borders and compel compliance from companies with no presence in the PRC. A Canadian company — or government — that assumes it can navigate that environment on goodwill and legal arguments alone should look carefully at what just happened to Meta.
Beijing has long presented itself as open to foreign investment. The Manus decision and the Outward Investment Regulations suggest that openness has always been conditional — and that Beijing is now more willing than ever to make those conditions explicit.
• Edited by Vina Nadjibulla, Vice-President Research & Strategy, and Ted Fraser, Senior Editor, APF Canada.
