The House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party recently released a policy report titled Buy What It Can, Steal What It Must: China’s Campaign to Acquire Frontier AI Capabilities, examining the multiple channels through which China acquires frontier AI capabilities, including lawful procurement, cloud access, physical smuggling, and model distillation.
The report cites a policy report by DSET’s Economic Security team, analyzing how Southeast Asian data centers have become a critical node enabling China to circumvent U.S. export controls. The Select Committee’s report sets out eight findings and corresponding legislative recommendations, aimed at closing the gaps in the current export control regime that still allow Chinese entities to acquire U.S. frontier AI capabilities through both lawful and illicit channels.
In Finding 3 — “China bypasses AI chip export controls through the cloud” — the report cites DSET’s October 2025 policy report, A Shared Future? Economic Security Challenges from Malaysia–China Economic Cooperation and Data Center Development.
The DSET report examines the economic cooperation between Malaysia and China in data center development and analyzes the resulting economic security challenges. The Select Committee’s report notes that export controls can keep a chip out of China without preventing a Chinese firm from using that same chip abroad to train or improve frontier models. This gap allows Chinese firms to establish or rent offshore data centers in Southeast Asian countries such as Malaysia and Singapore, accessing controlled U.S. chips remotely without those chips ever physically entering China.
The Select Committee’s report further notes that Alibaba has been training its latest Qwen model series in Southeast Asian data centers, while ByteDance has deployed approximately 36,000 Nvidia B200 chips in Malaysia through Aolani Cloud in a build-out worth more than $2.5 billion — roughly twenty-five times Aolani’s reported pre-deal hardware base.
Beyond the cloud access loophole, the report also documents China’s continued expansion of AI capability acquisition across other dimensions. On chipmaking equipment, the report notes that China has remained the world’s largest market for these tools for four consecutive years, with total spending reaching $38 billion in 2024, and China’s share of ASML’s DUV sales surging from 26 percent in 2022 to 70 percent in 2024.
On smuggling networks, the report details multiple large-scale cases from 2025 to 2026, including schemes routing restricted hardware through Singapore, Malaysia, and Thailand, as well as cases involving the relabeling of H100 and H200 chips. The report also notes that DeepSeek has reportedly deployed several thousand banned Nvidia Blackwell chips at its data center in Inner Mongolia.
The Select Committee’s report concludes with a two-track response. The first track recommends that Congress pass the AI OVERWATCH Act, the SCALE Act, and the Remote Access Security Act to close loopholes that still allow Chinese firms to lawfully access advanced American chips and cloud compute. The second track recommends passing the MATCH Act, the Chip Security Act, and the STOP Shells Act to stop equipment diversion and smuggling. In addition, the Committee calls on the Commerce Department’s Bureau of Industry and Security (BIS) and the Department of Justice (DOJ) to close foundry due diligence loopholes, treat adversarial model distillation as industrial espionage, and impose penalties severe enough to deter violations.
DSET states that the purpose of its research is to urge allied nations to recognize the policy threats posed by China, promote coordinated responses among allies, and advance cooperation with Taiwan. DSET welcomes the citation of its research in the House Select Committee on CCP’s report, and looks forward to seeing the governments of Taiwan and the United States draw on these findings to advance further policy cooperation.
