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The U.S.-China relationship is notoriously fraught: the two countries are economically intertwined yet have deep ideological differences. Arati Prabhakar, director of the White House Office of Science and Technology Policy, previously the founding CEO of Palo Alto-based tech nonprofit Actuate, says the two countries should work together on AI development, particularly when it comes to technical and safety standards.

"Steps have been taken to engage in that process," Prabhakar told the Financial Times. "We understand that we're in a moment where American leadership in the world depends on American leadership in AI."

Presidents Joe Biden and Xi Jinping took steps to lower tensions at their meeting last November. But U.S. officials are increasingly concerned the Chinese military could use advanced technologies for everything from codebreaking to developing new weapons.

An August 2023 Executive Order restricted American investments in Chinese technologies or products with the "potential to significantly advance the military, intelligence, surveillance, or cyber-enabled capabilities." The Commerce Department and other agencies maintain lists of Chinese companies that Americans are barred from doing business with, and Commerce is finalizing new regulations that would make it harder for Chinese firms to produce the kind of advanced chips that can be used to train AI models.

The U.S.-China Business Council, which represents more than 270 companies that do business in China, called the proposed chip rules "overly broad" given the export regulations already in place and warned the rules could inadvertently harm American competitiveness.

"Advanced U.S. manufacturers of all sizes and their American business partners and consumers have benefitted from globally integrated supply chains that have improved efficiency and lowered costs for U.S. manufacturers and consumers," the advocacy group said this month. "Revenues generated in China are reinvested in US R&D activities, which in turn allows US companies to maintain their competitive edge over Chinese and foreign competition."

Chinese companies have responded to the restrictions by developing their own technologies. Sanctioned cell phone company Huawei, for example, last fall introduced a new cell phone with a chip made by a domestic manufacturer.

American AI giants have navigated a delicate geopolitical balance while working in China. Representatives of OpenAI and other AI startups reportedly took part in secret talks about AI safety with Chinese AI companies and academics last year. Microsoft has long run an AI research lab in China, which has produced a generation of talent and was initially run by Kai-Fu Lee, the Taiwan-born founder of Sinovation Ventures.