US accuses Chinese AI firms of ‘malicious’ copying of AI technology

On Tuesday, the United States government alleged that Chinese artificial intelligence firms engaged in malicious copying of technology from American counterparts, potentially straining bilateral relations ahead of a scheduled meeting between leaders of the world's two leading economies. According to a statement from US law enforcement and intelligence officials, the Chinese companies utilized a technique called distillation to unlawfully acquire intellectual property from US AI labs.

Distillation involves training smaller AI models using output generated from larger, pricier models to reduce costs associated with developing new AI tools. The US government named six Chinese companies, including DeepSeek, Moonshot AI, and Alibaba, as engaging in this practice. Alibaba, the owner of the South China Morning Post, was also included in the list.

These companies allegedly used variants of American-made AI models to expedite the training of their AI products. The US officials claimed that China's government was likely aware of these activities. They targeted AI models from Anthropic, OpenAI, Alphabet's Google, and SpaceX. The officials stated, "China-based AI companies are engaging in aggressive, malicious and targeted distillation activities at an industrial scale."

As President Donald Trump's administration prepares for Chinese President Xi Jinping's visit to the United States in late September, the US government accused China of using distillation to lower research and development costs and bolster its military and cyberattack capabilities, which could potentially be utilized against the US and its allies.

This accusation mirrored a similar allegation made by the US in April prior to Trump's visit to Beijing. The Chinese embassy in Washington did not provide an immediate response to the allegations. On July 31, Reuters reported that Chinese military researchers had employed outputs from leading US AI models to train domestic Chinese AI systems and advance China's defense capabilities.