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China continues to purge both demand for AI chips from its ecosystem and foreign AI models, citing 'security risks' and privacy concerns
The starkest warnings come from China’s Ministry of State Security (MSS)
US firms continue to flock to cheaper alternatives for their AI needs
In what many may consider a tit-for-tat response to increasing US hardening of controls and sanctions over both AI hardware and software service providers, and procurement across the board, Chinese authorities seem to be increasingly pointing to further disentanglement from US-based providers, citing security concerns for users leveraging grey-market access to frontier models such as Anthropic's Fable.
The Chinese Ministry of State Security (MSS), responsible for both domestic and foreign intelligence operations and surveillance, has warned that users who leverage third-party tools and marketplaces to access highly sought-after compute resources from US-based AI models may be exposing themselves to security risks and potential backdoors for cyber espionage.
It pointed to inadequate encryption, bait-and-switch models, and even the potential retention of data as key concerns, aligning with the narrative of many US-based security agencies that sprang into action once models such as DeepSeek began gaining traction in domestic markets.
While both the Chinese and the US governments are increasingly hostile to foreign AI, citing them as security threats, US consumers continue to use models such as Alibaba's advanced Qwen 3.6, DeepSeek V4 Pro, and GLM 5.1, all of which offer open-source models that allow for localized AI as well as cheaper hosted inference options than what OpenAI and Anthropic currently charge for their services. The reason boils down to a simple factor: cost. Not only do distilled models like those offered by DeepSeek cost a fraction of their peers, but they can also be deployed without any licensing cost on existing hardware, even as models grow increasingly larger and complex in terms of compute power and memory requirements.
This has not stopped Chinese developers and AI enthusiasts from doing the exact opposite, hunting for the cheapest way to access US-based AI models and their compute at a fraction of the cost, regardless of the trade-offs involved.
Research published in May 2026 by Zilan Qian of the Oxford China Policy Lab documented a thriving ecosystem of API "transfer stations" — proxy services operating openly on Taobao, GitHub, and Telegram that resell access to Anthropic's Claude models at as little as a tenth of the official price.
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