If the game is stopping the opposition, two can play it
The launch of AI model Kimi 3 by China start-up Moonshot has caused tremors within the commerce ministries of both the U.S. and China
The U.S. is reportedly thinking about restricting access to Chinese-made artificial intelligence - and now China is thinking about doing the same..
The Financial Times is carrying a story Tuesday that China's Ministry of Commerce is consulting with Chinese corporates about the possibility of imposing export controls on AI and semiconductor technologies, citing two people involved in the discussions.
This follows on from, or may be a direct retaliation against, moves by the U.S. government to ban the import and adoption of more inexpensive Chinese AI models that were reported on the Axios website Monday.
Mutual suspicion has been heightened in recent days following the highly successful launch of Kimi 3 , the cutting-edge AI model released by Chinese start-up Moonshot at the world artificial intelligence conference in Shanghai this past weekend. Kimi 3 boasts 2.8 trillion parameters and, according to industry experts, outperforms all other models with the exception of Anthropic's Fable and OpenAI's ChatGPT 5.6.
Moonshot's new Kimi3 AI model outperforms almost all of its peers
What the launch of Kimi 3 has crystallized is the realization that the gap between China's best AI plays, and the most sophisticated American technologies, is narrowing rapidly.
The FT's article reports that the Chinese government discussed restricting the transfer of important data abroad and limiting the downloads of models by foreign users.
It isn't just AI models about which the Chinese government is concerned; it's also anxious that Western semiconductor players like Qualcomm $(QCOM)$ and Taiwan Semiconductor Manufacturing Company (TW:2330) may borrow advanced chip designs from Chinese companies like Huawei , Alibaba $(BABA)$ and ByteDance . The FT also suggests a proposal to prevent overseas entities buying strategic technologies in fields such as agentic AI.
Analogous to the U.S. situation, some leading voices in Chinese tech are telling the government that tighter measures would slow down AI development in China and ultimately impinge on its growth potential. It's also possible that the hints about export controls are diplomatic posturing by the Chinese government, intended to discourage the U.S. from imposing any restrictions on its technological freedoms.
Whatever the intention and ultimate outcome, the news failed to deter Chinese tech companies Tuesday. The China AMC Star 50 technology index CN:588000 jumped 11%. A major brokerage increased its margin financing quota, allowing retail investors greater access to liquidity. An exchange-traded fund tracking the Star 50 index attracted $2 billion of inflows Monday, according to Bloomberg.
It's been a difficult year for Chinese stocks, which largely have been left behind the rally in U.S., South Korean and Taiwanese chip stocks. For example, the KraneShares CSI China Internet exchange-traded fund KWEB has declined 22% year-to-date, the iShares MSCI China ETF MCHI has dropped 13% and Invesco's China Tech ETF CQQQ has also slumped 7%.
Writing in a daily note to clients, Louis Gave, founding partner and co-chief executive of Gavekal Research in Hong Kong, discussed the relative success of China's nascent AI industry. He attributes much of their success to the relative scarcity of cheap capital compared to the U.S.
Ironically, considering China's reputation for throwing money into loss-making operations, Gave points out Chinese companies are more capital-disciplined as a consequence. They "had to find workarounds, whether through open-sourcing software, stacking less powerful and cheaper local chips, investing more in China's electricity grid."
In 2025 it was DeepSeek making this point. This year, Gave adds, it's Moonshot that's generating the anxiety in Silicon Valley.
-Jules Rimmer
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(END) Dow Jones Newswires
July 21, 2026 05:12 ET (09:12 GMT)
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