China fights back in AI spat with claim US AI companies distil Chinese models

China’s government has vowed to “take all necessary measures” if the US government imposes new sanctions on AI companies. That threat came on Monday at a media Q&A staged by China’s Ministry of Commerce, during which local reporters asked about allegations that Chinese AI companies have distilled leading American AI models. The source of those allegations was Donald Trump’s Assistant for Science and Technology, Michael Kratsios, whose stance was backed by US Treasury Secretary Scott Bessent. China always denies that its military, intelligence services, and private industry steal any information or technology, and characterizes allegations of theft as propaganda intended to discredit the nation. The Ministry’s response to the Trump administration’s allegations re-uses those arguments. It then suggests that Chinese AI companies didn’t have enough time to distill the latest frontier models, because the US companies that developed them released them mere days before Chinese companies published their own code. Beijing also asserts “some Chinese models are already in a leading position” and that allegations of distillation are therefore unfounded. Which leaves China arguing that its AI companies are good, but not so good they can quickly distill frontier models and re-release them with Chinese characteristics. The Ministry then throws out its own allegation: “It is understood that many American AI companies have distilled Chinese models in their research and training.” The allegation is plausible but not necessarily a sign that US companies are abusing intellectual property. That argument comes from the Trump administration’s Kratsios, who last week argued that AI distillation can be a legitimate technique when “used to create smaller, more efficient models.” American model-makers could therefore distill hundreds of Chinese open source models without behaving badly. The Ministry’s post doesn’t specify how China’s government might respond to sanctions but ends with a call for the US to “jointly promote the positive development of artificial intelligence, and benefit both countries and the world by advancing and improving AI governance.” That’s a reference to the World Artificial Intelligence Cooperation Organization (WAICO), a 29-member organization that China recently convened to promote AI governance and deployment. China has also called for AI models to be open sourced, to advance innovation and in a spirit of cooperation. The China/US AI spat is taking place at the same time that stateside debate about AI regulation heated up after 77 technology companies signed an open letter calling on US lawmakers to support open weights models. China and a big section of the tech industry are therefore on the same side on at least one of the many issues AI raises. ®