OpenAI and Google confirmed they provided artificial intelligence services to Singapore-based affiliates of Chinese technology companies on the Pentagon’s blacklist, prompting renewed scrutiny of U.S. rules governing access to advanced AI systems.
By yourNEWS Media Newsroom
OpenAI and Google have provided advanced artificial intelligence services to Singapore-based subsidiaries of Chinese technology companies that appear on a Pentagon blacklist, according to reporting from the Financial Times.
The newspaper reported Friday that the companies confirmed they had supplied AI services to affiliates of Alibaba, Baidu and Tencent. Each of those Chinese companies has been placed on the Defense Department’s 1260H list over alleged links to China’s military.
The transactions are legal under current U.S. rules, but the disclosures have sharpened debate over whether Washington should expand export controls to cover advanced AI software and services more broadly.
U.S. restrictions already apply to advanced semiconductor chips used to train leading AI models. The federal government has also taken steps to regulate access to some frontier AI models, including Anthropic’s Mythos and Fable models and OpenAI’s GPT-5.6. However, current policy does not broadly bar Chinese-headquartered companies, including firms on the 1260H list, from using advanced AI services outside China.
OpenAI told the Financial Times that it suspended access last month for Alibaba-affiliated users of its application programming interface after identifying suspected “distillation.” The process involves using the output of one AI model to improve competing systems.
An OpenAI spokesperson said the company reported the suspected activity to the U.S. government.
OpenAI said it does not allow access to its models from inside China, but permits “some companies” with Chinese ownership or headquarters to use its tools in countries “where we can enforce safeguards and monitor for distillation.”
“We would rather see more of the world using AI shaped by democratic values than AI controlled by autocratic governments,” OpenAI said, adding that “we don’t think nationality alone should decide access.”
Google said its AI services are available in Hong Kong and Singapore under company policies that prohibit distillation and other misuse. The company also said geographic restrictions alone are not enough because sophisticated users can find ways around them.
The issue has become part of a broader argument over how the Trump administration should handle competition with China in artificial intelligence. Critics of the current framework say export controls should cover not only chips, but also access to advanced AI models that could help foreign competitors improve their own systems.
“The administration says we need to beat China on AI all the time, but the problem is they haven’t done anything on export control, which is the actual tool we have to slow China down,” Chris McGuire, a technology and security expert at the Council on Foreign Relations, told the Financial Times.
Anthropic has adopted a more restrictive policy than OpenAI and Google. The company bans Chinese companies and foreign entities they own from using its advanced AI models and recently tightened its restrictions after detecting what it described as attempts by Chinese firms to evade safeguards.
Anthropic has previously accused Chinese AI companies, including DeepSeek, Moonshot and MiniMax, of distillation. In a letter to Congress last month, Anthropic alleged that Alibaba used 25,000 fraudulent accounts to generate more than 28.8 million interactions with its Claude model in violation of its terms of service. Alibaba did not respond to requests for comment on those allegations.
Alibaba has separately challenged its placement on the Pentagon blacklist. The company asked a federal court last month to remove the designation, calling it “arbitrary and capricious.”
Baidu declined to comment, and Tencent did not respond to requests for comment on its use of U.S. AI models.
Joe Khawam, an AI policy and national security law specialist at the Law Reform Institute, argued earlier this year that stronger export controls are needed to stop Chinese companies from extracting advanced AI capabilities without paying the development costs borne by U.S. firms.
He warned that such practices could erode “the economic foundation of U.S. frontier AI leadership.”
The disclosures leave policymakers weighing whether current safeguards are sufficient when Chinese-owned or Chinese-headquartered companies access U.S. AI services from jurisdictions outside mainland China. For now, the reported transactions remain legal, even as calls grow for tighter controls on how advanced AI capabilities are distributed abroad.
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