Treasury Secretary Scott Bessent warned of sanctions against China over AI model distillation, calling it "IP theft," as the U.S. and China plan September talks on the technology.
U.S. Treasury Secretary Scott Bessent on Tuesday said the Trump administration will investigate whether Chinese artificial intelligence companies have distilled their models from American ones, calling the practice "IP theft" and warning of sanctions.
Chinese open-weight models have narrowed the gap with leading U.S. offerings from OpenAI and Anthropic, raising questions among tech executives and officials about the durability of America's AI lead. Moonshot AI, a Chinese startup, released a model called Kimi K3 this month that beats U.S. rivals on some industry benchmarks.
"If we see, especially that overseas models are stealing from our great companies, we have the ability to sanction them because of this theft," Bessent told Fox Business on Tuesday.
The technical term for the practice is distillation, an AI training method where a smaller model is built using outputs from an existing stronger one. Anthropic sent a letter to the U.S. Senate Committee on Banking, Housing, and Urban Affairs last month alleging that Alibaba had carried out "the largest known distillation attack" against it to date.
"We are finding watermarks of our U.S. large language models on many of the Chinese models, and that's unacceptable," Bessent said. "We're going to be looking at that in the coming days or weeks."
The U.S. and China are planning AI talks in September, according to a Reuters report Tuesday. Bessent will represent the U.S. during the discussions.
Both Alibaba and Anthropic have faced their own accusations of theft. Anthropic agreed to pay $1.5 billion in September to settle a class action with authors who alleged it downloaded books from pirated databases. The New York Times sued OpenAI and Microsoft in 2023 over using its content to train models without permission.
Bessent's comments signal enforcement could become a focus of the September talks. No specific sanctions or timeline have been announced.
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