China said on Thursday it will investigate Meta’s roughly $2 billion acquisition of artificial intelligence startup Manus, a move that highlights Beijing’s increasing scrutiny of advanced AI technologies and their cross-border transfer amid intensifying global competition in the sector.

Meta acquired Singapore-based Manus last month as part of its push to deepen automation and AI agent capabilities across its consumer and enterprise products. While the companies did not disclose financial terms, the Wall Street Journal reported that the deal was valued at more than $2 billion, citing people familiar with the transaction.

China’s Ministry of Commerce said it will conduct an assessment and investigation into whether the acquisition complies with the country’s laws and regulations governing export controls, technology import and export, and overseas investment. The ministry’s statement, translated by Google, suggests the probe will examine both the origins of Manus’s technology and how intellectual property developed in China may be transferred or used following the acquisition.

“The Chinese government consistently supports enterprises in conducting mutually beneficial transnational operations and international technological cooperation in accordance with laws and regulations,” Ministry of Commerce spokesperson He Yadong said at a press briefing, signaling that while Beijing is not rejecting overseas deals outright, it intends to assert regulatory oversight over strategically sensitive technologies.

Manus traces its roots to the Chinese startup Butterfly Effect, also known as Monica.im, before being spun out into a separate entity that relocated its headquarters to Singapore earlier this year. The move came as the company sought to position itself more clearly as a global AI player at a time of rising regulatory and geopolitical friction between China and the United States over advanced technologies.

The startup drew significant attention in March after launching its first AI agent, which can assist with tasks such as market research, coding, and data analysis. It was widely described in Chinese tech circles as a potential “next DeepSeek,” a reference to another fast-growing AI firm that gained prominence for its rapid technical progress.

As part of its global expansion plans, Manus reportedly laid off most of its staff in Beijing in July. The company said the Meta acquisition would not change its operational base, with Manus continuing to operate from Singapore. As of December, the startup said it had 105 employees across Singapore, Tokyo, and San Francisco.

Manus has also pointed to strong commercial traction. The company said it surpassed $100 million in annual recurring revenue in December, just eight months after launching its product, which it described as the fastest any startup had reached that milestone from zero revenue. In April, it raised $75 million in a funding round led by U.S. venture capital firm Benchmark, further raising its profile among Western investors.

In a statement released in December, Meta said the acquisition would see “Manus’s exceptional talent” join its AI teams to help deliver general-purpose AI agents across Meta’s consumer and business offerings, including within Meta AI. The deal fits squarely into Meta’s broader strategy of accelerating product-focused AI development as competition intensifies with rivals such as OpenAI and Google.

Analysts say China’s move reflects a broader shift in how Beijing views advanced AI capabilities.

“China’s probe underlines that it considers advanced AI agents, models and related IP to be strategic assets,” Nick Patience, AI lead at The Futurum Group, told CNBC.

He added that a prolonged approval process, potentially with conditions on how technology developed in China can be used, is more likely than an outright block, but that the investigation itself gives Beijing leverage in a high-profile, U.S.-led acquisition.

The scrutiny comes as governments around the world tighten controls on the flow of advanced technologies. China has, in recent years, expanded export control rules covering areas such as semiconductors, AI algorithms, and data-related technologies, often in response to U.S. restrictions on chip exports and investment flows. Deals involving AI firms with Chinese roots have increasingly become focal points for these regulatory battles.

For Meta, the investigation creates a new challenge to an already aggressive AI expansion. The company has spent billions of dollars to strengthen its position as generative AI becomes central to consumer products, advertising tools, and enterprise software. In June, Meta invested $14.3 billion for a 49% stake in data-labeling and AI infrastructure startup Scale AI, bringing its founder and CEO, Alexandr Wang, into Meta’s leadership ranks. In December, Meta also announced the acquisition of AI wearable startup Limitless.

Internally, Meta chief executive Mark Zuckerberg has been reshaping the company’s AI strategy. The firm has deprioritized its long-standing Fundamental Artificial Intelligence Research (FAIR) unit in favor of a more product-driven generative AI team, as Meta seeks to rapidly improve and commercialize its Llama family of AI models, CNBC has previously reported.

China’s probe into the Manus deal is the latest example of how corporate AI strategy is increasingly entangled with national policy and geopolitics. Even as global tech companies race to secure talent and technology, cross-border acquisitions in AI are likely to face longer timelines, stricter conditions, and heightened political sensitivity, especially when they involve firms with roots in both China and the United States.

Global defense equities climbed sharply on Thursday, with major aerospace and defense shares extending gains after U.S. President Donald Trump called for a significantly larger U.S. defense budget in 2027.

Trump’s proposal, posted on his Truth Social platform, suggests raising the U.S. military budget to $1.5 trillion, a more than 66% increase over the roughly $901 billion approved for 2026.

In his post, Trump described the proposed budget as essential to building what he called the “Dream Military” — a force capable of keeping the United States “SAFE and SECURE, regardless of foe,” citing what he characterized as “very troubled and dangerous times.”

Investors clearly took the initiative as a bullish signal for defense spending ahead. U.S. contractors were among the top gainers in premarket trade: Northrop Grumman rose around 6–8%, Lockheed Martin climbed roughly 6–7%, RTX (parent of Raytheon) added more than 4%, and smaller specialized firms such as Kratos Defense saw even larger percentage gains. European aerospace and defense equities also strengthened, with the Stoxx Europe Aerospace & Defense index reaching new all-time highs before settling slightly lower later in the session.

Beyond Western markets, some Asian defense names participated in the broader rally, with firms such as Mitsubishi Heavy Industries and Bharat Electronics recording moderate share price gains, illustrating the global dimension of investor response.

Geopolitical Drivers Underpinning Rally

The broader geopolitical backdrop has lent additional impetus to defense sector optimism. In early January, U.S. forces carried out an operation resulting in the capture of Venezuelan President Nicolás Maduro and his wife — a dramatic escalation that has major implications for regional security dynamics and defense planning. Following the raid, the Trump administration has indicated plans to manage Venezuelan oil assets and has revived debate over U.S. strategic interests in territories such as Greenland and potential military options in Colombia.

These developments have heightened perceptions of geopolitical risk and suggested a potentially more assertive U.S. foreign policy stance, reinforcing the appeal of defense and aerospace companies whose products and services are core to military capability and sustainment.

Market Reaction: Contracts, Cash Flows, and Valuation

Analysts say the prospect of a sharp increase in baseline defense spending boosts the outlook for long-term government contracts, which are a fundamental driver of revenue for large contractors. Lockheed Martin’s extensive portfolio — including fighter jets, missile systems, and advanced space systems — is seen as particularly positioned to benefit from expanded budget allocations. Northrop Grumman’s intelligence, surveillance, and reconnaissance platforms and RTX’s radar and missile defense systems are similarly viewed as integral to an enlarged U.S. defense force structure.

European defense stocks — often tied to NATO commitments and cross-Atlantic interoperability — rallied as investors anticipated indirect benefits from stronger U.S. defense leadership and spending. Names such as BAE Systems, Leonardo, Rheinmetall, and Renk also posted meaningful gains.

While markets initially reacted enthusiastically, some caution remains over the feasibility and implementation of such a substantial budget increase. A proposal of this magnitude would require congressional approval, and budget experts have pointed to procedural, fiscal, and political hurdles. Nonetheless, the immediate reaction in equity markets reflects a pricing-in of potential future earnings growth tied to defense expenditure.

Policy and Broader Economic Implications

Trump’s budget call comes amid broader debate in Washington over defense priorities, procurement timelines, industrial base capacity, and the balance between shareholder returns and investment in manufacturing. Recent Trump commentary has also criticized certain defense firms for stock buybacks and dividend policies at times when military equipment deliveries are perceived to lag, suggesting potential executive and regulatory scrutiny in addition to spending shifts.

Longer-term implications for global markets could include a recalibration of risk assets if investors increasingly favor sectors tied to government spending over cyclical areas more sensitive to economic growth. In the United States, a surge in defense spending could also influence inflation expectations, capital allocation, and fiscal policy debates heading into election years.

The Bank of Japan on Thursday struck an increasingly confident tone on the state of the economy, saying regional conditions were improving gradually and that many companies see the need to keep raising wages.

This is seen as a key signal that the central bank believes the foundations for further interest rate hikes are steadily falling into place.

In its quarterly assessment based on reports from regional branch managers, the BOJ maintained its economic view for all nine regions, unchanged from three months earlier, describing them as either “picking up” or “recovering gradually.” The findings reinforce the bank’s view that Japan is moving closer to a durable cycle of rising wages and prices, even as external risks mount.

At the same time, central bank officials cautioned that escalating tensions with China could become a new drag on Japan’s still-fragile recovery, particularly given the deep supply chain ties between the two economies. While the impact has so far been limited, some executives warned it could begin to spread across industries.

“We haven’t heard of any severe damage so far. But a wide range of manufacturers and non-manufacturers say the impact could appear ahead,” said Hiroshi Kamiguchi, head of the BOJ’s Nagoya branch, which oversees a region anchored by Toyota and its extensive supplier network. He added that some firms were increasingly wary of China’s export restrictions and how they might ripple through production and procurement.

Kamiguchi also warned that excessively volatile moves in the yen could hurt business sentiment and economic activity, echoing concerns within the BOJ that currency weakness can fuel import-driven inflation while squeezing households and smaller firms.

Overall, however, the tone of the regional survey was one of cautious optimism. The BOJ said many companies plan to raise wages in the 2026 fiscal year at roughly the same pace as in 2025, reflecting robust corporate profits and a persistently tight labor market. This continuity in wage-setting is particularly significant for policymakers, who have long argued that sustained pay growth is essential for normalizing monetary policy after decades of ultra-loose conditions.

The survey also showed that firms across many regions continue to pass higher costs onto consumers. Companies cited rising input prices, labor costs, and distribution expenses, with some noting they were considering further price hikes to reflect the impact of the yen’s recent declines. This suggests inflationary pressures remain embedded in the economy, even as global growth slows.

The assessment underlines the BOJ’s growing confidence that Japan can withstand headwinds from higher U.S. tariffs. While some regions reported weaker exports and output due to tariff effects and tougher competition from Asian rivals, others pointed to solid demand, particularly for artificial intelligence-related products, which is helping support factory orders and investment.

“While some regions said exports and output were weakening due to the impact of U.S. tariffs and intensifying competition from Asian companies, others said firms were enjoying solid orders reflecting increasing global demand mainly for AI-related goods,” the BOJ said in its summary.

Developments in China remain a key area of watch. Several regions reported that restrictions on travel to Japan following diplomatic tensions had so far had only a limited impact on domestic demand. Kazuhiro Masaki, head of the BOJ’s Osaka branch, said some hotels and retailers had seen sales decline due to fewer Chinese group tourists, but that the shortfall was largely offset by steady inflows from other countries. Still, some firms fear the negative effects could widen if tensions persist.

The regional reports will feed directly into the BOJ board’s review of its quarterly growth and inflation outlook at its next policy meeting on January 22–23. Many analysts expect the central bank to keep rates unchanged this month, but the underlying message from the regions supports the case for further tightening later this year.

The BOJ recently raised its policy rate to 0.75% from 0.5%, the highest level in three decades, marking another step away from years of extraordinary monetary support. Even after that move, real interest rates remain deeply negative, with consumer inflation having exceeded the BOJ’s 2% target for nearly four years.

Minutes from the BOJ’s December meeting showed some board members growing uneasy about the inflationary effects of a weak yen, which raises the cost of imports and weighs on household purchasing power. Masaki said companies in western Japan appeared to be taking higher borrowing costs in stride, seeing them as a natural consequence of sustained wage gains and rising prices.

“The situation has changed dramatically from the time Japan was suffering from deflation, and had seen wages or prices barely rise,” he said.

However, the BOJ’s challenge now is balancing its increasing confidence in domestic momentum with mounting geopolitical and external risks. While the recovery appears to be broadening, officials are acutely aware that shocks from China, currency markets, or global trade could still test Japan’s long-awaited exit from its era of ultra-loose monetary policy.