China has responded sharply to allegations from three US federal agencies accusing major Chinese artificial intelligence companies of large-scale model distillation from American counterparts. The FBI, NSA, and CISA jointly reported that firms including DeepSeek, Alibaba, and Moonshot AI extracted billions of tokens from US-developed models beginning in late 2024, potentially with Chinese government awareness.
Chinese officials rejected the characterization on Wednesday, with the Commerce Ministry asserting that the US was attempting to establish dominance over the global AI sector. The ministry stated that distillation—a technique in which less sophisticated AI models are trained on more advanced ones—is a standard practice across the industry, utilized by both American and Chinese companies alike. Officials indicated that if the US proceeded with restrictions against Chinese AI firms under this justification, China would implement countermeasures in response.
The US agencies contended that the scope and technical sophistication of the distillation campaigns suggested the practice represented a fundamental component of Chinese companies’ development strategies rather than a supplementary approach. American officials characterized the volume of token extraction as constituting intellectual property theft. Meanwhile, China’s Ministry of Foreign Affairs called on the US to cease making unsubstantiated accusations, with spokesperson Mao Ning emphasizing that China’s AI advancement reflected domestic technological capability and advocating for international cooperation in the field.
The dispute emerges ahead of a planned summit between Chinese President Xi Jinping and US President Donald Trump, where AI policy may feature prominently among discussion topics. Treasury Secretary Scott Bessent stated during remarks that China could not surpass the US in artificial intelligence development. The named Chinese companies had not publicly commented on the allegations as of the time of reporting.
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