China accuses US of ‘AI hegemonism’, threatens countermeasures over potential probes
By Eduardo Baptista
BEIJING, July 27 (Reuters) – China’s Commerce Ministry on Monday accused the United States of “AI hegemony” and threatened countermeasures after senior U.S. officials said Chinese AI companies could face investigations, sanctions and trade restrictions over alleged theft of U.S. technology.
The department said Washington had threatened Chinese companies with penalties based on allegations they used “distillation” to copy advanced U.S. artificial intelligence models despite what it called a lack of factual or legal basis.
Model distillation is a widely used AI training technique in which developers use the outputs of a more capable model to train or improve another system. U.S. officials say they distinguish between legitimate distillation and large-scale extraction, which amounts to intellectual property theft.
‘ALL NECESSARY PRECAUTIONS WILL BE TAKEN’
“Against any action that would seriously harm Chinese interests, China will take all necessary measures to strictly protect its legitimate rights and interests,” a ministry spokesman said in a statement. he said.
The comments mark an escalation in a dispute centered on Beijing-based Moonshot AI, whose recently released Kimi K3 model is notable for its coding abilities and has intensified a debate in Washington over whether Chinese developers are copying U.S. models or quickly closing the technological gap with their own research. The controversy echoes the reaction in the United States to last year’s rise of Chinese startup DeepSeek.
White House Office of Science and Technology Policy Director Michael Kratsios said last week that the US government has information indicating that Moonshot distilled Anthropic’s Claude Fable 5 model to develop the Kimi K3.
Kratsios claimed that Moonshot created a complex internal platform to perform large-scale distillation of US models, switching between multiple access methods to avoid detection. He also claimed that the company had purchased servers equipped with Nvidia’s GB300 chips and had access to such systems in Thailand, presumably to train its models.
US Treasury Secretary Scott Bessent later warned that Chinese companies could face financial sanctions or be placed on the Commerce Department’s Entity List, which restricts access to US technology.
“We support open source AI and the innovation it unlocks. But open source is not open season on American IP,” Bessent wrote on social media platform X.
“Sanctions and Entity List designations will be on the table when (Chinese) firms launch covert, industrial-scale distillation attacks that amount to intellectual property theft,” he said.
Moonshot rejected suggestions that the Kimi K3’s performance was achieved through distillation, telling China’s National Business Daily newspaper last week that the performance gains were due to original changes to the underlying architecture.
Placement on the Entity List could severely restrict Moonshot’s access to U.S. semiconductors, software and cloud services. The US used trade blacklisting as a central part of its campaign against Chinese telecommunications equipment maker Huawei starting in 2019.
Anthropic said it detected more than 3.4 million interactions with Claude models linked to Moonshot in February. It was stated that hundreds of fake accounts were used to target abilities such as reasoning, coding, data analysis, tool use, computer vision and the operation of computers.
(Reporting by Eduardo Baptista and Beijing Newsroom. Editing by Alexandra Hudson and Mark Potter)
