US Administration Accuses Chinese Entities of Large-Scale AI Model Distillation, Announces Countermeasures
Introduction
The White House has issued a memorandum accusing foreign entities, mainly based in China, of conducting large-scale campaigns to extract capabilities from US advanced AI systems. The administration stated it will share intelligence with American AI companies, develop defensive best practices, and explore penalties.
Main Body
On April 23, Michael Kratsios, director of the White House Office of Science and Technology Policy, released a memo alleging that foreign actors—primarily in China—are engaged in deliberate, large-scale distillation campaigns. According to the memo, these actors use tens of thousands of fake accounts and methods to bypass security to systematically extract private information from US AI models, thereby taking advantage of US innovation. The administration indicated it would work with US AI firms to identify such activities, build defenses, and hold offenders responsible. Furthermore, the memo was released at the same time as a bipartisan bill in the House Foreign Affairs Committee that would create a process to identify foreign entities extracting key technical features from closed-source US AI models and impose sanctions. Representative Bill Huizenga (R-MI), the bill’s sponsor, described model extraction as a form of economic coercion and intellectual property theft. Chinese officials responded by rejecting the allegations. Liu Pengyu, a spokesperson for China’s embassy in Washington, stated that China opposes unfair treatment of its companies and emphasized its commitment to intellectual property protection through cooperation and healthy competition. Foreign Ministry spokesman Guo Jiakun described the US claims as false accusations and accused Washington of forcing technology, urging an end to suppression and a focus on mutual technological exchange. The accusations follow earlier statements by US AI companies. In February, Anthropic alleged that Chinese firms DeepSeek, Moonshot AI, and MiniMax had illegally extracted capabilities from its Claude chatbot using distillation. OpenAI, in a letter to lawmakers, accused DeepSeek of free-riding on its models. David Sacks, then serving as President Trump’s AI and crypto adviser, also claimed that DeepSeek had distilled knowledge from OpenAI’s models. Last year, DeepSeek released a large language model that competed with US counterparts at much lower cost, upsetting markets. Distillation is a known technique for training smaller, cheaper models from larger ones. Anthropic acknowledged its legitimate use but argued that unauthorized large-scale extraction allows competitors to gain powerful abilities in a fraction of the time and cost of independent development. The practice is not one-sided: San Francisco-based startup Anysphere recently stated that its latest product was based on an open-source model from Chinese company Moonshot AI. However, Kyle Chan, a fellow at the Brookings Institution, noted that distinguishing unauthorized distillation from legitimate data requests is very difficult, like "looking for needles in an enormous haystack." He suggested that information sharing and coordination among US AI labs could help, and that the federal government could assist with this. Chan also observed that the timing of the memo—before a planned mid-May state visit by President Trump to Beijing for a summit with President Xi Jinping—may affect the administration’s approach, as Trump might avoid increasing tensions before the meeting.
Conclusion
The US administration has formally accused Chinese entities of systematic AI model theft and announced plans to counter such activities, while China has denied the allegations and called for cooperation. The situation happens at a time when the performance gap between US and Chinese AI is narrowing, and a high-level diplomatic meeting is coming, leaving the future of enforcement and bilateral relations uncertain.