China Skirts US Attempts to Restrict AI Exports

Washington spent years constructing export barriers around America’s most sensitive artificial intelligence technology. Four expert witnesses told the U.S. Senate Foreign Relations Committee that China found ways around every one of them.

See Also: OnDemand | Fireside Chat: Staying Secure and Compliant Alongside AI Innovation

A Tuesday panel outlined systematic leakage across hardware, software, talent and infrastructure. Where one pathway closes, Beijing opens another, and U.S. policy appears calibrated for threats that have already changed, they said.

James Mulvenon, vice president of intelligence at Pamir Consulting, told senators that claims by Western industry leaders that the People’s Liberation Army doesn’t need advanced U.S. AI chips are wrong. Citing what he said were “authoritative open sources,” he said the Chinese military was already designing American technology into its command-and-control systems, primarily because American-designed chips perform better and consume less power than domestic alternatives.

Beijing is attempting to boost domestic production but the military continues to rely on foreign technology, Mulvenon said. Media reports of widespread smuggling operations support his assessment.

Chris Miller, a professor at Tufts University’s Fletcher School of Law and Diplomacy, said China is boosting its electricity generation capacity to accommodate burgeoning data centers. Some analyses show China could have 400 gigawatts of spare generation capacity by 2030, absorbing AI demand without stressing the grid. Data centers located in America’s largest data center cluster – just miles away from the District of Columbia – reportedly must wait up to seven years for electricity hookups.

Miller cited data from MacroPolo’s Global AI Talent Tracker to say that around 40% of Chinese-origin top AI researchers worked in the United States as of 2023. But that advantage is eroding, with Chinese AI researchers now less likely to work in the U.S. compared to several years ago. DeepSeek’s success was driven by teams of young researchers who had no opportunity to study abroad during the pandemic, staying in China to build the country’s AI capabilities there, he said.

China reportedly seized DeepSeek researchers’ passports to limit their ability to leave, Miller told senators. Beijing is now considering a new visa program to attract highly skilled engineers from abroad.

Tarun Chhabra, head of national security at Anthropic, highlighted a different vulnerability. The company in September updated its terms of service to prohibit direct access to Claude from restricted regions, including China, as well as by companies anywhere that are majority-owned by organizations headquartered in those regions.

Chhabra said Anthropic observed Chinese companies establishing foreign subsidiaries to access American AI.

Anthropic in September detected and disrupted what it assessed with high confidence to be the first documented AI-orchestrated cyberespionage campaign conducted by a Chinese state-sponsored actor. The threat actor manipulated Anthropic’s Claude Code tool into functioning as a largely autonomous cyberattack agent, targeting approximately 30 organizations, including technology companies, financial institutions and government agencies. The AI executed approximately 80% to 90% of tactical operations independently, with humans intervening only at strategic decision points, Chhabra said. At peak activity, the AI made thousands of requests, often multiple per second (see: AI Tool Ran Bulk of Cyberattack, Anthropic Says).

Chhabra urged maintaining and strengthening semiconductor manufacturing equipment controls, which he called America’s most “durable leverage.” Unlike finished chips, which can potentially be stockpiled or smuggled, semiconductor manufacturing equipment enables long-term production and is hard to build domestically.

Gregory Allen, senior advisor at the Center for Strategic and International Studies, said China’s chip-making industry has a chokepoint: extreme ultraviolet lithography machines, exclusively produced by Dutch company ASML and which China cannot legally obtain.

Without access to such equipment, China’s most advanced logic chip producer, SMIC, has been stuck at the seven-nanometer technology node for years and may continue to be stuck there, Allen testified. China’s semiconductor imports last year amounted to nearly $400 billion – more than any other good, including oil.

But Allen warned against complacency. He said that China’s progress in solar cells and electric vehicles – industries where the U.S. applied no export controls – demonstrates Beijing can achieve technological dominance without Western restrictions slowing it.