Chinese state-backed research institutes and universities are spending thousands of dollars on Microsoft and Amazon’s cloud services to gain access to advanced chips and artificial intelligence technology from US firms like Nvidia.
The entities — including some that are sanctioned by the US — remain cut off from advanced AI tech due to US export bans that are in place since 2022.
But they have managed to exploit loopholes in those export controls to secure advanced computing power and access generative AI models, according to Reuters findings from recent public tender documents.
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One such entity — Sichuan University — said in a tender document in April it was building a generative AI platform and purchasing 40 million Microsoft Azure OpenAI tokens to support the delivery of the project.
The Azure OpenAI service gives customers access to the Microsoft-backed AI startup’s language models, such as GPT-4.
Meanwhile, Sichuan University has been on a US export control list known as the ‘Entity List’ since 2012 due to its involvement in nuclear weapons development. Companies on the Entity List are restricted from receiving US-origin goods and technology.
But the university’s procurement document in May showed that Sichuan Province Xuedong Technology Co Ltd supplied the tokens it sought to purchase.
Similarly, another sanctioned research firm — the University of Science and Technology of China’s (USTC) Suzhou Institute of Advanced Research — said in a tender document in March that it wanted to rent 500 cloud servers, each powered by eight Nvidia A100 chips, for an unspecified purpose.
Exports to China of the Nvidia chip, which is used to power large-language models (LLM) such as OpenAI’s ChatGPT, are banned by the US.
USTC is also on the Entity List — since May — for acquiring US technology for quantum computing that could help China’s military, and involvement in its nuclear programme development.
Even so, USTC’s tender was fulfilled by Hefei Advanced Computing Center Operation Management Co Ltd, a procurement document showed in April.
But the document did not name the cloud service provider and Reuters could not determine its identity.
Spending thousands to chase tech
The Reuters investigation comes at a time when Chinese president Xi Jinping is pushing officials to develop ‘self reliance’ in new-age technologies such as AI.
The push has, in part, been fuelled by Washington’s export controls and has meant that many Chinese institutes are shelling out hundreds of thousands of yuans to gain access to the technology.
Shenzhen University, for instance, spent 200,000 yuan ($27,996) on an Amazon Web Services (AWS) account to gain access to cloud servers powered by Nvidia A100 and H100 chips for an unspecified project, according to a March tender document. It got this service via an intermediary, Yunda Technology Ltd Co, the document showed.
The H100 — like A100 chip — cannot be exported to China.
Similarly, Zhejiang Lab, a research institute developing its own LLM, GeoGPT, said in a tender document in April that it intended to spend 184,000 yuan to purchase AWS cloud computing services as its AI model could not get enough computing power from homegrown Alibaba.
A spokesperson for Zhejiang Lab said that it did not follow through with the purchase but did not respond to questions about the reasoning behind this decision or how it met its LLM’s computing power requirements.
Accessing advanced AI models
Amazon has offered Chinese organisations access not only to advanced AI chips but also to advanced AI models such as Anthropic’s Claude which they cannot otherwise access.
“Bedrock provides a selection of leading LLMs including prominent closed-source models such as Anthropic’s Claude 3,” Chu Ruisong, President of AWS Greater China, told a generative AI-themed conference in Shanghai in May, referring to its cloud platform.
In various Chinese-language posts for AWS developers and clients, Amazon highlighted the opportunity to try out “world-class AI models” and mentioned Chinese gaming firm Source Technology as one of its clients using Claude.
Amazon has dedicated sales teams serving Chinese clients domestically and overseas, according to two former company executives.
After Reuters contacted Amazon for comment, it updated dozens of posts on its Chinese-language channels with a note to say some of its services were not available in its China cloud regions. It also removed several promotional posts, including the one about Source Technology. Amazon did not give a reason for removing the posts and did not answer a Reuters query on that.
“Amazon Bedrock customers are subject to Anthropic’s end user licence agreement, which prohibits access to Claude in China both via Amazon’s Bedrock API (application programming interface) and via Anthropic’s own API,” the AWS spokesperson said.
AWS controls nearly a third of the global cloud infrastructure market, according to research firm Canalys. In China, AWS is the sixth-largest cloud service provider, according to research firm IDC.
Anthropic said it does not support or allow customers or end-users within China to access Claude.
“However, subsidiaries or product divisions of Chinese-headquartered companies may use Claude if the subsidiary itself is located in a supported region outside of China,” an Anthropic spokesperson said.
A long-running headache
Providing access to advanced chips — like that of Nvidia — or advanced AI models through the cloud is not a violation of US regulations since only exports or transfers of a commodity, software or technology are regulated.
“This loophole has been a concern of mine for years, and we are long overdue to address it,” Michael McCaul, chair of the US House of Representatives Foreign Affairs Committee, told Reuters in a statement.
The US government has, for months, attempted to plug the loophole.
In January, Commerce Secretary Gina Raimondo said Washington was planning to introduce new rules that would require firms like Amazon and Microsoft to verify the identity of foreign entities who sign up for their services through a “know-your-customer programme”.
The proposed rule faced stiff pushback from the cloud industry.
Legislation was also introduced in Congress in April to empower the commerce department to regulate remote access of US technology, but it is not clear if and when it will be passed.
A department spokesperson said it was working closely with Congress and “seeking additional resources to strengthen our existing controls that restrict PRC companies from accessing advanced AI chips through remote access to cloud computing capability.”
Meanwhile, a spokesperson for Amazon’s cloud business said: “AWS complies with all applicable US laws, including trade laws, regarding the provision of AWS services inside and outside of China.”
“We are aware the commerce department is considering new regulations, and we comply with all applicable laws in the countries in which we operate.”
- Reuters, with additional editing by Vishakha Saxena
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