Chinese companies are circumventing US restrictions on AI chips and models by accessing them through cloud services provided by American companies like Amazon. Although US regulations prohibit the direct export of advanced AI technologies, they do not cover cloud-based access, creating a loophole. A Reuters investigation revealed that multiple Chinese entities, including universities and research institutes, have used intermediaries to acquire cloud services powered by restricted AI chips like Nvidia’s A100 and H100. This loophole has sparked concern among US lawmakers, leading to proposed legislation and new rules to regulate remote access to US technologies. Amazon has stated it complies with all applicable laws, but the situation highlights the challenges of enforcing export restrictions in the cloud era.
Cloud Service Providers and Chinese Intermediaries
The investigation highlighted that four of these entities explicitly mentioned Amazon Web Services (AWS) as their cloud service provider. Rather than acquiring the services directly from AWS, these Chinese entities accessed them through intermediaries within China. These tender documents illustrate the various strategies employed by Chinese companies to secure the advanced computing power necessary for developing generative AI models. This has raised concerns about how US companies are profiting from China’s growing demand for such computing resources, despite the intended restrictions.
An AWS spokesperson responded to these findings, stating, “AWS complies with all applicable US laws, including trade laws, regarding the provision of AWS services inside and outside of China.” This assertion underscores the current regulatory framework’s limitations, as it does not explicitly address the provision of advanced AI capabilities through cloud-based platforms.
Case Studies of Chinese Entities Using AWS Cloud Services
The Reuters report provided specific examples of Chinese entities leveraging this loophole. Shenzhen University, for instance, spent approximately 200,000 yuan (around $28,000) through an intermediary to access AWS cloud servers powered by Nvidia A100 and H100 chips—components that are banned from direct export to China under US regulations. Similarly, Zhejiang Lab, a research institute, sought AWS cloud services to support its AI model development, citing insufficient computing power from local providers.
These cases have sparked concern among US lawmakers. Michael McCaul, chair of the US House of Representatives Foreign Affairs Committee, emphasized the need for action, stating, “This loophole has been a concern of mine for years, and we are long overdue to address it.” His comments highlight the growing awareness and urgency within the US government to close this regulatory gap.
The Growing Concern and Legislative Response
Industry experts also acknowledge the issue. Pareekh Jain, CEO of Pareekh Consulting, noted, “Yes, this is a loophole that allows Chinese companies to access restricted AI technologies.” He explained that the current business model, which involves cloud services being sold through resellers or intermediaries, complicates efforts to restrict and monitor end users. Jain predicted that as regulations on cloud services tighten, more business would likely flow through resellers in China, shifting the burden of compliance from major providers like AWS to these intermediaries.
In response to these concerns, legislation was introduced in Congress in April to give the US Commerce Department the authority to regulate remote access to US technology. Additionally, the department has proposed new rules that would require cloud services to verify users of large AI models and report to regulators when these models are used for potentially malicious activities.
An AWS spokesperson reiterated the company’s commitment to compliance, stating, “We are aware the Commerce Department is considering new regulations, and we comply with all applicable laws in the countries in which we operate.” As Amazon continues to offer advanced AI chips and models, such as Anthropic’s Claude, through its cloud services, it faces increasing scrutiny and regulatory challenges. Following the inquiries from Reuters, Amazon reportedly updated its Chinese-language posts to clarify the availability of certain services, reflecting the ongoing adjustments in response to the evolving regulatory landscape.
Looking Ahead
The revelations from the Reuters report underscore a significant challenge in the enforcement of US export restrictions on advanced AI technologies. While direct exports of high-performance AI chips and models to China are banned, Chinese entities have found ways to access these technologies through cloud services, exploiting a loophole in the current regulatory framework. As US lawmakers and regulatory bodies move to address this issue, the ongoing developments will likely have profound implications for the future of US-China technology relations and the global AI landscape.
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