US lawmakers received a stark warning on 27 June that China is dramatically escalating its campaign to steal American artificial intelligence technology and other advanced innovations through a coordinated blend of cyber espionage, human intelligence operations, academic partnerships, and commercial investments — a campaign described as a mounting threat to both US national security and global technological leadership.

What the Hearing Revealed

The warning was delivered before the House Select Committee on the Chinese Communist Party, where former Acting Director of the Defence Intelligence Agency, David Shedd, testified that Beijing has constructed an elaborate infrastructure to systematically extract American commercial and technological secrets. 'The campaign which blends cyber espionage, human intelligence, academic collaboration, and commercial investments has been instrumental in propelling China's rapid economic and military rise,' Shedd told the committee.

He described how China had leveraged this multi-pronged approach to transform itself into a global technological power, targeting companies, universities, and individual researchers across sectors including artificial intelligence, telecommunications, biotechnology, quantum computing, and advanced weapons systems. 'Corporate America, professors, academic researchers, are all fair targets,' he said, adding that China's intelligence services had grown dramatically in size and capability.

The Alibaba-Anthropic 'Distillation' Allegation

A significant portion of the hearing focused on emerging threats to the AI sector specifically. Lawmakers referred to reports that Chinese technology giant Alibaba had allegedly targeted US AI company Anthropic through what was described as a 'distillation' attack — a technique designed to extract knowledge embedded in advanced AI models.

Shedd explained that the method involves simplifying outputs from expensive, high-capability AI models so they can be reproduced at a fraction of the original development cost. 'They're able to bypass the investment that these large AI companies in the United States have put into it,' he said, arguing that such techniques allow Chinese firms to 'leapfrog' years of costly research and development without making equivalent investments.

Key Sectors Under Threat

The testimony underscored that Beijing's intelligence apparatus does not limit itself to defence-related targets. According to Shedd, the operation spans civilian and dual-use technologies alike — with AI, semiconductors, and quantum computing increasingly viewed in Washington as critical battlegrounds carrying both commercial and military significance. This comes amid a broader recognition that the US-China strategic rivalry has moved decisively into the technology domain.

What Lawmakers Were Urged to Do

Shedd called for stronger government-industry cooperation to protect what he termed the 'crown jewels' of American technology, urging Congress to prioritise safeguarding intellectual property. When asked what immediate legislative steps could raise the cost of Chinese influence operations, he pointed to TikTok, arguing that enforcing existing legislation affecting the platform would send a clear signal to Beijing while limiting its access to US user data.

Broader Strategic Context

The hearing reflects a deepening consensus in Washington that technological competition with China has become the central axis of the two countries' strategic rivalry. Notably, this is not the first time Congress has convened to address Chinese technology theft — but the explicit focus on AI distillation attacks and named US companies marks a sharper, more operationally specific line of concern than previous sessions. How Congress translates this testimony into enforceable policy will determine whether the warning produces concrete protection or remains a rhetorical escalation.