China’s AI startups face few barriers to buy American tech; BIS, DoD, and Treasury on the sidelines

An explosive new report, Harnessed Lightning: How the Chinese Military Is Adopting Artificial Intelligence, from the Center for Security & Emerging Technology (CSET) is a wake-up call to America’s national security and strategic trade control policymakers. The report demonstrates how thousands of Chinese artificial intelligence (AI) startups can access American technologies, including advanced DRAM semiconductors. Of the 273 AI suppliers to the Chinese military identified in this study, less than two dozen are named in U.S. export control and sanctions regimes, whether the Entity List published by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), the Chinese Military-Industrial Complex Companies List published by the Department of the Treasury’s Office of Foreign Assets Control, or the List of Chinese Military Companies (NDAA Sec. 1260H List). Notably these AI companies may acquire U.S. tech which is subsequently sold and packaged for a military contract under a larger entity such as the Aviation Industry Corporation of China (AVIC) or China Aerospace Science and Technology Corporation (CASC), both restricted by DoD.

More largely the report describes China’s goal to create asymmetric advantage against the U.S. in the Indo-Pacific, to develop systems to jam and blind U.S. sensor and information networks and the country’s military-civil fusion (军民融合) development strategy to acquire the technology to fulfill these goals. A typical AI startup is founded by STEM graduates from a leading Chinese university, headquartered in a commercialization enclave or government-run innovation, engaged with researchers at defense-affiliated universities and research laboratories, and in receipt of contracts from the Chinese military, police, state-owned enterprise, or other authority.

From this impressive report, Senators Marco Rubio (R-FL), Tom Cotton (R-AR), Roger Wicker (R-MS), Bill Hagerty (R-TN), and Bill Cassidy (R-LA) wrote to Secretary Gina Raimondo. They asked her to blacklist Chinese AI companies that help arm the People’s Liberation Army. “Despite the pressing need to restrict the PLA’s advancement in key technology areas, our government has done little to impede the flow of U.S. exports and investment to Chinese AI companies with PLA ties,” the senators wrote.

They urged the Secretary to answer the following questions:

  1. If the intelligence community can identify core technologies vital to the United States’ competition with China, why has BIS failed to identify foundational technologies and a comprehensive range of emerging technologies, as required by law?
  2. Why weren’t all of the PLA’s 273 AI suppliers listed in the CSET report already on the Entity List, given that these companies’ ties to the PLA were apparently open-source information?
  3. Now that these PLA AI supplier firms have been identified, will BIS add these Chinese AI companies to the Entity List?

Presently China is dependent on the U.S. for as much as 90 percent of its high-end chips and despite much high-profile policy, it appears that all but a few of the AI startups have difficulty obtaining U.S. equipment, information, and capital. Processors from NVIDIA and Xilinx make their way to restricted entities with military end uses through intermediary companies. Indeed U.S. companies partner on AI-research projects with Chinese businesses that supply the PLA with AI systems and equipment.

The CSET study reviewed publicly available requests for proposals by the Chinese military from April-December 2020, uncovering 343 AI-related equipment contracts, among some 66,000 documents. Contracts ranged in price from $1,300 (RMB 9,000, for an intelligent sound-and-light alarm detection system) to $3 million (RMB 21 million, for an intelligent UAV data access and management platform), with the average of $240,000 (RMB 1.7 million).

We applaud CSET for this incredibly impressive report. This research is formidable in keeping Americans across the country and world, safe. We also urge Secretary Raimondo and the Dept. of Commerce to act swiftly and respond to the Senator’s letter. Using the tools we have, including the power of BIS th

We applaud CSET for this timely and informative report to keep Americans safe. We also urge Secretary Raimondo and the Dept. of Commerce to act swiftly and respond to the Senator’s letter. Using the tools we have, including the power of BIS through export controls, we can mitigate the serious risk that the PLA and Chinese technology present to the privacy and security of the United States, but we must act now.