China threatens USA with countermeasures over possible AI sanctions

The threat was triggered by remarks from senior US government officials that Chinese AI companies should expect investigations, sanctions, and trade restrictions over the alleged theft of American technology. US Treasury Secretary Scott Bessent warned that affected companies could face financial sanctions or being placed on the so-called "Entity List" maintained by the US Department of Commerce, which severely restricts access to US technology. "We support open-source AI and the innovations it enables. But open source does not mean you can help yourself to American intellectual property at will," Bessent wrote on the social media platform X.

Background: Point of contention distillation

At the center of the dispute is the Beijing start-up Moonshot, whose recently released model "Kimi K3" has attracted attention for its programming capabilities. Michael Kratsios, director of the White House Office of Science and Technology Policy, stated last week that the US government has information indicating Moonshot copied the "Claude Fable 5" model from Anthropic by means of so-called distillation in order to develop Kimi K3. This involves a process in which one AI system is trained on the outputs of another model.

Kratsios also accused Moonshot of acquiring servers equipped with GB300 chips from US semiconductor manufacturer Nvidia and of accessing such systems in Thailand to train its own models. Moonshot rejected speculation that the performance of Kimi K3 had been achieved through distillation. The company told the Chinese newspaper "National Business Daily" that the performance gains were attributable to its own modifications to the underlying architecture.

Reaction from Beijing

China's Ministry of Commerce stated that Washington was threatening Chinese companies based on claims that they had copied advanced US AI models through distillation, despite a lack of substantive or legal grounds. Beijing sees the possible sanctions as an attempt to deliberately hinder its own AI industry and slow China's technological rise.

The United States has already used the "Entity List" since 2019 as a central instrument in its dispute with Chinese telecommunications equipment maker Huawei. Should Moonshot actually be placed on this blacklist, access to important US technologies such as high-performance chips and software would be severely restricted. Industry experts see the conflict as another step in the two powers' struggle for dominance in future technologies.

Consequences for the AI industry

Observers in Beijing interpret the ministry's sharp rhetoric as a signal that the Chinese government regards the Moonshot case not merely as an economic matter but as a geopolitical one. A spokesperson said the developments in Washington would be closely monitored and all options kept open. The coming weeks may show whether the threats translate into concrete trade policy measures.

Meanwhile, uncertainty is growing within China's AI industry. Investors and developers fear that placement on the US list could affect not only Moonshot but other companies as well. Observers expect the US government to publish details on possible measures in the coming days. Until then, it remains unclear whether a direct sanctions decision will follow or whether the conflict will initially be played out through diplomatic channels.