U.S. Agencies Accuse Chinese AI Firms of Industrial-Scale Model Distillation

US security agencies have accused six China-based artificial intelligence companies of conducting industrial-scale knowledge-distillation campaigns targeting the proprietary capabilities of US frontier AI models.

US agencies say several Chinese AI companies have conducted large-scale knowledge-distillation campaigns targeting American frontier AI models. [Photo: China Daily]

The National Security Agency, Cybersecurity and Infrastructure Security Agency and Federal Bureau of Investigation issued a joint cybersecurity advisory on Sept. 8 warning that Chinese AI companies were using large-scale distillation to extract capabilities from advanced US models.

The agencies named DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun and Z.AI.

They said the companies had extracted billions of tokens through millions of exchanges with US frontier models, including models from Anthropic, OpenAI, Google and xAI, since at least late 2024.

The advisory said the activity was “likely with Chinese government awareness.”

Knowledge distillation itself is a legitimate technique used in AI development.

It generally involves training a model using outputs from another, often more capable, model.

The US agencies said the activities they identified went beyond ordinary research use, describing them as targeted, malicious and industrial-scale campaigns designed to obtain restricted capabilities.

The advisory said the Chinese companies allegedly routed requests through multiple channels, including application programming interfaces, cloud providers and third-party aggregators, in ways that violated the terms of service of US AI companies.

The agencies also said the companies used tactics such as bulk purchases of premium subscriptions shared among developers to reduce the cost of their campaigns.

The US claims have not gone unanswered. Beijing rejected the allegations, with China's Commerce Ministry calling them groundless and accusing Washington of seeking a monopoly in the AI industry.

Chinese officials also said distillation is a common practice used by AI developers around the world, including in the United States.