US accuses China of “industrial-scale” AI theft. China says it’s “slander.”

A US congressional committee urged the State Department to assess whether Chinese AI “distillation” tactics amount to espionage or cybercrime.

The report says classifying adversarial distillation as controlled technology transfer could help block access to US models and punish offenders.

China rejected the accusations as slander, escalating tensions ahead of a planned Trump-Xi meeting.

The dispute could trigger sanctions, prosecutions, and tighter export controls affecting US-China AI competition and chip access.