China’s new export curbs draw a line around its AI crown jewels

• By Claire Fu, Eduardo Baptista and Laurie Chen / Reuters

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China’s proposed artificial intelligence (AI) export curbs will push a business model favored by Beijing and the industry’s biggest players: keeping valuable technology at home while selling access to it abroad as rivalry with the US intensifies.

The draft rules, released on Oct. 16, distinguish between foreign customers using Chinese AI services and foreign companies obtaining the models, data or expertise needed to operate or reproduce them independently.

“The structure the leadership prefers, with IP [intellectual property] and R&D [research and development] kept onshore, and operations and access sold abroad, is the one the market was already converging on,” Ankura managing director Alfredo Montufar-Helu said.

The new rules would broadly allow overseas users to access Chinese AI through Web sites and cloud platforms while subjecting some transfers of underlying technology or deployments overseas to government approval.

That distinction matters for developers that rely on computing facilities abroad, where they can gain access to powerful chips constrained by US export restrictions on China.

The broader regulatory oversight adds to the already uncertain macroenvironment facing China’s tech giants and start-ups, who are wrestling with a meltdown of Chinese AI and semiconductor stocks.

China is expected to adopt the proposals by the end of the year and issue guidelines on implementation later, a source familiar with the matter said on condition of anonymity.

The draft would add 23 AI-related technologies to a list banning or restricting their export, including advanced models, agents that carry out tasks with limited human direction, and technology used to design chips and run vast computing facilities.

A temporary requirement to register certain transfers took effect immediately.

The rules could impact how leading Chinese AI firms run advanced models on overseas data centers, structure international partnerships and handle foreign investment or ownership of AI assets.

DeepSeek, Moonshot and Z.AI offer models to overseas customers through Web sites or cloud platforms. Some Chinese AI developers have also turned to overseas computing facilities to access advanced chips restricted from export to China.

Nvidia’s most advanced processors cannot be exported to China under US restrictions.

Researchers at major Chinese AI labs are seeking clarification on whether they can train or run their most advanced models on foreign-owned overseas servers, a person briefed on the matter said on condition of anonymity.

In a worst-case scenario, developers might have to maintain separate domestic and overseas versions of the same downloadable model, they said.

Beijing Dacheng Law Offices senior partner Liu Jing (劉晶), who participated in consultations with policymakers, said companies also wanted more clarity on the tests used to determine which models would be covered.

The draft specifies three tests: the computing work needed to train a model, with a threshold of 10 to the power of 26 calculations; its size, measured by at least 2 trillion parameters; or placing among the world’s top 10 in certain assessments of performance, use or efficiency.

Parameters are the numerical settings a model learns during training. The ranking test could cover smaller systems that excel at specialised tasks, but the draft does not identify which rankings would count.

Chinese law firm Han Kun in an analysis questioned how regulators would count the size of models that activate only some of their components for each task, and said one proposed chip design provision could reach beyond the most advanced products, because it lacks a minimum performance requirement.

The proposals are open for public comment until Nov. 15.

The Chinese Ministry of Commerce did not respond to a request for comment.

The rules could extend beyond model releases to corporate deals. Registration requirements, effective from Oct. 16, cover transfers that put Chinese technology under foreign ownership or control, including qualifying transactions already underway, a Fangda analysis found.

Beijing’s move earlier this year to order Meta to unwind its more than US$2 billion acquisition of Chinese-founded AI start-up Manus has already shown the risks facing foreign buyers.

Han Kun said that for computing centers, the draft provides simplified approvals for Chinese companies building and operating their own facilities abroad, but not expressly for transferring technology to foreign customers to build equivalent system.

The controls also cover methods for coordinating more than 10,000 AI chips.

Montufar-Helu said security concerns, including keeping powerful cyberattack capabilities and sensitive data in China, accompanied a commercial aim to retain valuable technological advantages.

Jincheng Tongda & Neal partner Yang Jingru (楊靜茹) described the emerging approach as a counterpart to US restrictions on China’s access to advanced technology and investment.

“The US controls the inflow of computing power, hardware and capital, while China is beginning to systematically manage the outflow of models and technological assets,” Yang wrote.