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Chinese state-affiliated organizations have discovered a novel method to circumvent US export restrictions on advanced AI chips.
These entities are gaining access to cutting-edge AI capabilities by leveraging cloud services provided by American tech giants despite being unable to purchase the hardware directly due to US regulations.
The Cloud Loophole and Cases of AI Restriction Bypass
As per Reuters, an in-depth examination of Chinese procurement documents has unveiled a pattern of state-linked entities tapping into cloud platforms offered by companies like Amazon and Microsoft.
This strategy allows Chinese entities to utilize high-performance AI chips and services crucial for developing large language models (LLMs) and other sophisticated AI applications.
These technologies are otherwise off-limits under current US export controls, which have been tightening over the past two years to prevent China’s military from acquiring cutting-edge technology.
Notably, the regulatory gap these Chinese entities exploit stems from the focus of US restrictions on physical hardware transfers, leaving cloud-based services largely unaddressed.
This loophole has enabled several Chinese institutions to access powerful AI resources.
For instance, a leading university in Shenzhen invested in an Amazon Web Services (AWS) account to utilize cloud servers powered by Nvidia’s A100 and H100 chips – hardware explicitly banned from export to China. The university made this purchase through a local intermediary company, further obscuring the transaction.
In another discovery, a research institute developing its own LLM sought AWS cloud services after finding Alibaba’s cloud unit, Alicloud, insufficient for their intensive computing needs. While this particular purchase didn’t ultimately materialize, it underscores China’s reliance on foreign cloud infrastructure for advanced AI development.
US Tech Giants’ Involvement and Regulatory Challenges
Major US tech companies find themselves at the center of this complex issue.
AWS, which commands nearly a third of the global cloud infrastructure market, has asserted its compliance with all applicable US laws, including trade regulations related to service provision within and outside China.
Similarly, Chinese entities have sought Microsoft’s Azure platform for its AI capabilities, including access to OpenAI tokens for generative AI development.
The US government is aware of this regulatory gap and is working to close it. In April, a new bill was introduced to grant the Commerce Department authority to regulate remote access to US technology, although its passage is uncertain.
Additionally, the Commerce Department proposed rules earlier in January that would require cloud computing services to verify the identity of large AI model users and report potentially malicious activities.
There is a new AI proposal from @aipolicyus. It should SLAM the Overton window shut.
It's the most authoritarian piece of tech legislation I've read in my entire policy career (and I've read some doozies).
Everything in the bill is aimed at creating a democratically… pic.twitter.com/uBSjKyD1NB— Neil Chilson ⤴️⬆️🆙📈 🚀 (@neil_chilson) April 9, 2024
However, enforcing these regulations presents significant challenges, particularly as Chinese organizations continue to seek access through intermediaries and cloud-based platforms.
