US Treasury Secretary Scott Bessent claimed that China “can never get ahead” of America in artificial intelligence, in part due to its “central planning”, as three government agencies accused Beijing of maliciously copying technology from its leading firms.
“The technical word for stealing and copying American AI models is distillation. So, the Chinese distil our models and they can never get ahead of us,” he said on Tuesday during a discussion at the Southern Methodist University’s Cox School of Business in Dallas.
“It’s kind of like if you’re looking over someone’s shoulder, copying their homework, you can never get a higher grade than they do.”
Model distillation is a widely used AI training technique in which a smaller model learns from the output of larger ones.
The remarks came weeks before Bessent is expected to spearhead US bilateral talks on AI governance with his Chinese counterparts ahead of President Xi Jinping’s visit to Washington later this month.
The rhetoric from Bessent is in sharp contrast with recent remarks from President Donald Trump, who last week said he was excited about the Chinese leader’s visit.
“By the way, we have the president of China coming on the 24th. That’ll be very exciting. Great, love to have him. A lot of good things to discuss, very, very productive things to discuss with President Xi,” Trump said.
“AI is going up, and we’re leading China in AI very substantially,” he added.
Also on Tuesday, three US agencies accused leading Chinese AI companies of engaging in “aggressive, malicious and targeted distillation activities at an industrial scale”. They alleged that the practice was carried out “likely with Chinese government awareness”.
In a jointly released advisory report, the National Security Agency, the Cybersecurity and Infrastructure Security Agency and the FBI named six leading Chinese AI companies: DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun and Z.AI.
The report claimed that the firms extracted “billions of tokens across millions of exchanges/requests from US frontier AI models, including variants of Claude, GPT, Gemini and Grok, since at least late 2024”. Alibaba owns the South China Morning Post.
The Chinese embassy in Washington rejected US allegations and termed the Trump administration’s distillation concept a “deliberate attack on China’s development and progress in the AI industry”.
“We urge the US to respect facts, discard bias, stop its containment on China’s sci-tech development and choose the course of action conducive to sci-tech exchanges and cooperation between China and the US,” embassy spokesman Liu Chang told the SCMP.
“Such actions will only stifle global AI advances and serve no one’s interests.”
As Chinese companies have narrowed the capability gap in frontier AI models, US firms and Trump administration officials have increasingly accused Beijing of stealing and copying American technology to speed up the development of its own systems.
Bessent also contrasted China’s approach with the US strategy. Beijing relied on “central planning on AI”, which would “never work” because the government would not “turn over enough control”, he argued.
According to Bessent, Chinese leaders fear that AI could eventually threaten the Communist Party if technology developed by its leading companies became powerful enough to “bring their regime down”.
“Whereas in the US, we want to make sure things are safe, and we want to make sure that AI serves the American people,” he added.
Both sides are preparing for dedicated talks on AI later this month, even as Washington and Beijing remain divided over the scope of the discussions, with China seeking a broader conversation and the US pushing to focus on AI safety, sources told the SCMP.
The Treasury Department said in August that the administration was looking forward to “using our position as the global leader in AI to share our expertise with the world’s number two”.
The two countries agreed to begin formal talks on AI governance following the Trump-Xi May summit in Beijing.
The bilateral discussions are planned amid competing US and Chinese approaches to shaping the global AI landscape. The US is advancing its Pax Silica supply chain initiative, while China is promoting the World Artificial Intelligence Cooperation Organisation.
US under secretary of state for economic affairs Jacob Helberg, architect of the 24-member Pax Silica, said in July that he hoped dialogue with Beijing on AI governance would help create areas for “constructive engagement” despite intensifying rivalry between the two countries.
“Our goal is to pursue these engagements in good faith and work to restate our views and hear Chinese views,” Helberg told the SCMP in an exclusive interview. -- SOUTH CHINA MORNING POST
