China has formally accused American artificial intelligence companies of using AI models developed by Chinese firms to train their own platforms, intensifying the technology rivalry between the world’s two largest economies. The accusation, delivered by the Chinese Ministry of Commerce on Monday, claims that “many American artificial intelligence enterprises have distilled Chinese models during their research, development and training processes.” The statement comes just days after the United States accused Chinese companies of copying proprietary American AI technology.
Distillation at the Heart of the Dispute
The conflict revolves around AI model distillation, a common technique where a smaller model learns to replicate the performance of a larger, more capable one. This process reduces computational costs while preserving most of the original model’s capabilities, making it widely used across the industry. However, U.S. officials allege that some Chinese firms have used distillation to reproduce advanced U.S. AI systems without authorization. Beijing has denied these allegations, calling them “lacking factual basis and legal grounds,” and accusing the U.S. of “double standards” and “artificial intelligence hegemonism.”
AI Race Heats Up
The latest exchange follows reports that a senior White House official accused Chinese startup Moonshot AI of illegally copying Anthropic’s advanced AI model to create its highly anticipated Kimi K3. The release of Kimi K3 garnered significant attention in the tech world as it competed strongly with top global AI models. According to IDC, global AI spending—encompassing AI-powered applications, infrastructure, and related services—is expected to surpass $631 billion by 2028, underscoring the strategic importance of AI across industries. Intellectual property, model development, and governance disputes are becoming increasingly common amid this surge in investment.
China Signals Potential Countermeasures
China maintains that model distillation is standard industry practice and that American AI firms have also benefited from Chinese-generated models. The ministry added, “China will take all necessary measures to firmly safeguard its legitimate and lawful rights and interests.” The charges follow a warning by U.S. Treasury Secretary Scott Bessent that Washington could impose restrictions on Chinese entities, and reports suggest the U.S. is considering restrictions on some foreign-developed open-source AI models. These developments highlight the growing importance of AI as a major flashpoint in the broader technological and geopolitical rivalry between the U.S. and China.
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