A Reuters investigation has surfaced what many in Washington feared but few could prove: Chinese military institutions have been systematically drawing knowledge from American AI models — not by stealing the models themselves, but by learning from their outputs, a technique known as distillation. The practice sidesteps U.S. export controls on advanced chips, allowing units of the People's Liberation Army to deploy capable AI systems on modest hardware for cyberwarfare, drone targeting, and surveillance. This moment sits at the intersection of intellectual property, national security, and the d