International Institute for Strategic Studies | Virpratap Vikram Singh
The United States has elevated China's AI model distillation attacks to a national security concern, as evidenced by the White House's NSTM-4 memorandum in April 2026. This follows disclosures from leading US AI companies—Google, Anthropic, and OpenAI—regarding industrial-scale campaigns by China-linked actors to illicitly extract capabilities from proprietary models, circumventing billions in R&D costs. These distillation attacks allow compute-constrained Chinese firms to meet performance benchmarks they cannot independently achieve, reinforcing narratives of cost-efficient Chinese AI development and narrowing the performance gap with US frontier models. While the US aims to sustain its AI dominance and export its full-stack AI package, China pursues an "independent, controllable, and collaborative" ecosystem despite holding only 14% of global AI compute. The situation echoes the 2006–2013 US–China commercial espionage, though a 2015-style diplomatic agreement is unlikely. With AI deeply integrated into economic and national security, the US is exploring accountability mechanisms, diplomatic engagement, and legislative actions like the proposed Deterring American AI Model Theft Act, alongside private sector countermeasures. The intensifying geopolitical competition suggests reciprocal interference risks may extend beyond the current US-China contest.
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