Chinese AI developers exploit loophole to access restricted US chips

Over the past two years, the U.S. government has imposed strict export controls on high-end AI chips to China, aiming to curtail the Chinese military's access to advanced technology. However, new revelations suggest that state-linked Chinese entities are bypassing these restrictions by exploiting a legal loophole: accessing U.S. AI capabilities and chips through cloud services provided by companies like Amazon Web Services (AWS) and Microsoft.

Public tender documents reviewed by Reuters have uncovered that at least 11 Chinese entities, including universities and research institutes, have leveraged cloud platforms to gain access to advanced U.S. technology that is otherwise off-limits due to export bans. Four of these entities specifically identified AWS as their cloud service provider, although they accessed these services indirectly through Chinese intermediaries.

For instance, Shenzhen University reportedly spent 200,000 yuan (approximately $28,000) on an AWS account to tap into cloud servers powered by Nvidia A100 and H100 chips—technology explicitly banned for export to China. The university accessed these services through Yunda Technology Ltd Co, a Chinese intermediary. These powerful chips are critical for training advanced AI models, including those with potential military applications.

The documents also revealed that similar tactics were used to access Microsoft’s cloud services. In April, Sichuan University detailed plans in a tender document to build a generative AI platform, supported by 40 million Microsoft Azure OpenAI tokens. These tokens were supplied by Sichuan Province Xuedong Technology Co. Ltd., according to procurement records from May.

The loophole hinges on the fact that current U.S. regulations govern the export or transfer of physical commodities, software, or technology—not remote access to these resources through cloud computing.

Michael McCaul, chair of the U.S. House of Representatives Foreign Affairs Committee, expressed frustration over the issue, stating, "This loophole has been a concern of mine for years, and we are long overdue to address it."

In response, the U.S. government is taking steps to tighten regulations. Legislation was introduced in Congress in April to grant the Commerce Department authority to regulate remote access to U.S. technology. However, the timeline for passing this legislation remains unclear. A spokesperson from the Commerce Department confirmed that the agency is collaborating with Congress and seeking additional resources to strengthen existing controls.

In addition to legislative efforts, the Commerce Department proposed a rule in January that would require U.S. cloud computing services to verify the identity of large AI model users and report instances where U.S. cloud services are used to train AI models capable of "malicious cyber-enabled activity." This rule, if finalized, would also empower the Commerce Secretary to impose prohibitions on certain customers.

AWS has denied any wrongdoing on the matter. "AWS complies with all applicable U.S. laws, including trade laws, regarding the provision of AWS services inside and outside of China," a spokesperson for Amazon's cloud business said."