The race to build the future of AI basically comes down to a race between China and the United States. And while that race looks a lot closer than you might expect at any given moment, there's a reason the U.S. is always leading that race. It's because China, as usual, is cheating.
Every few months we learn about a new Chinese AI startup that has produced surprising new results. Just two months ago the hot new company was Moonshot AI.
The newest Kimi K3 model from Beijing-based startup Moonshot, run by a Pink Floyd-loving entrepreneur who earned his doctorate in Pittsburgh, appears to be catching up to the best versions of Anthropic’s Claude and OpenAI’s ChatGPT.
“This may be the single biggest release of the year,” and marks a moment when open-source Chinese models are surpassing closed U.S. models, said Anastasios Angelopoulos, co-founder and CEO of Arena, a platform for evaluating AI systems.
The release of Kimi K3 happened just as Xi Jinping was addressing a conference on AI. He proposed that AI development should involve "global cooperation."
American-led restrictions have blocked China from accessing some of the world’s most advanced technologies, spurring China’s efforts to build its own know-how and intensifying the rivalry between the world’s two biggest economies.
“The development of artificial intelligence should not be a solo performance by any single country but rather a symphony of global cooperation,” Xi said at the event.
Behind the scenes, China isn't relying on global cooperation. It's using the same trick it always has to keep up with advancing US technology: China steals it. The process is called "distillation" and it allows China to quickly pick up whatever new tricks the top US models have developed at great cost. And because they have much lower development costs, Chinese companies like Moonshot can turn around and offer their knock-off versions at cheaper prices.
The White House has vowed to crack down on this behavior since April. Once again, China has responded by talking about cooperation.
In a Thursday memo, Michael Kratsios, the president’s chief science and technology adviser, accused foreign entities “principally based in China” of engaging in deliberate, industrial-scale campaigns to “distill,” or extract capabilities from, leading AI systems made in the U.S. and “exploiting American expertise and innovation.”...
China’s embassy in Washington said it opposed “the unjustified suppression of Chinese companies by the U.S.”
“China has always been committed to promoting scientific and technological progress through cooperation and healthy competition. China attaches great importance to the protection of intellectual property rights,” said Liu Pengyu, the embassy spokesperson.
China's idea of cooperation always looks like them stealing our technology and marketing a knock-off. They've been doing this for decades of course but with AI, since the work is available by download, they can do it much more quickly. That also explains why these new AI startups are always just a bit behind the leading U.S. models. They may come up with the third best model in the world for a month or so, but never the best.
Beijing-based startup Moonshot AI made a splash with the release of Kimi K3, taking Silicon Valley by surprise with capabilities close to U.S. rivals. It was ranked No. 3 globally in model intelligence in July, shortly after its release, behind Anthropic’s Claude Fable 5 and OpenAI’s GPT-5.6 Sol, according to AI benchmarking platform Artificial Analysis. But Kimi K3 now ranks ninth, behind new frontier models from Anthropic, OpenAI, Meta and SpaceXAI, indicating China's AI lead is fluid...
The U.S. has accused China’s AI developers of engaging in what it has called “industrial-scale distillation,” in which AI models are trained to copy or imitate the capabilities of more powerful ones.
Last month the FBI released a report on those Chinese distillation efforts. The report basically named every Chinese model that has made news in the past two years.
The FBI, National Security Agency and Cybersecurity and Infrastructure Security Agency issued a joint cybersecurity advisory Tuesday that said Chinese AI developers had extracted, or “distilled,” capabilities from some of the most advanced AI models in the U.S. like Anthropic’s Claude, OpenAI’s GPT, Google’s Gemini and SpaceXAI’s Grok “since at least late 2024.”
The advisory named China’s DeepSeek, Alibaba, Moonshot AI and Z.ai and said the activities were done “likely with Chinese government awareness.”
They can only do this by violating the terms of service of the US models, gaining access to the models through pathways that hide their actual location. China didn't even deny what it was doing, it simply tried to claim "distillation" was a standard industry practice. And once again they talked about global cooperation.
Distillation “is a common practice” used by many AI companies worldwide including those in the U.S., the ministry added. It said the U.S. accusations reflected its “anxiety and double standards.”...
“China’s AI development is the result of high-level technological self-reliance and strength,” ministry spokesperson Mao Ning said at a regular news conference. “We maintain that all parties should strengthen cooperation to promote AI development that is open, inclusive, universally beneficial and oriented toward the common good.”
So China's view is that it's normal for their companies to steal work from our companies and we should stop trying to hold back their "technological self-reliance." You can imagine how they would feel about global cooperation if they even had something worth stealing and we did the same to them. But when it comes to AI, the transfer is endlessly in one direction. And you can bet that if Bernie Sanders succeeds in stopping AI development here, the Chinese models will suddenly stop progressing, at least for a while.
The real threat here is China's theft of our tech. We should be using some of these advanced AI models to put an end to that. This is no longer just industrial espionage. Given the danger these models present, this is a national security issue.
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