Tensions between the United States and China have intensified after Washington accused Chinese AI startup Moonshot AI of improperly using Anthropic’s Claude Fable 5 model to develop its Kimi K3 AI system. In response, China’s Commerce Ministry warned that it would take action if Chinese companies were harmed by the proposed U.S. measures.
Rejecting the allegations, China’s Commerce Ministry accused the U.S. of engaging in “AI hegemonism” and said American authorities were targeting Chinese technology companies without sufficient legal or factual basis. A ministry spokesperson said, “For any action that causes substantive harm to Chinese interests, China will take all necessary measures to firmly safeguard its legitimate rights and interests.”
The dispute centres on model distillation, a process where developers use outputs from a larger AI model to improve a smaller one. U.S. officials allege that Moonshot AI went beyond accepted practices and carried out large-scale extraction of Anthropic’s technology.
Last week, White House Office of Science and Technology Policy Director Michael Kratsios said the U.S. had found evidence that Moonshot AI created an internal infrastructure to secretly extract data from Anthropic. According to the allegations, Anthropic identified more than 3.4 million interactions linked to Moonshot across hundreds of fraudulent accounts targeting Claude’s reasoning, coding, and computer-use capabilities.
The U.S. has also warned of possible penalties. Treasury Secretary Scott Bessent said Chinese companies found engaging in illegal model distillation could face Commerce Department Entity List restrictions or financial sanctions. He stated, “We support open-source AI and the innovation it unlocks. But open source is not open season on American IP. When PRC firms conduct covert, industrial-scale distillation attacks that cross the line into IP theft, sanctions and Entity List designations will be on the table.”
Moonshot AI has denied the accusations, maintaining that Kimi K3’s performance in coding and problem-solving is based on its own proprietary architectural innovations rather than the use of Anthropic’s technology.
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