(I wrote this on BlueSky. Posting here because I want to see how on point my analysis was, looking back from years hence)

I saw the headline “American companies’ use of Chinese AI models is high and growing.” (can’t find it now but this is an example of the genre) Duh. Hypesters sold AI as “save money by replacing humans with AI!” so if success is minimising $ out, then Chinese Cheap And Good Enough will beat Expensive And American-Made Premium USDA Grade Mythos models.

The intel advantage to China is huge, if they can figure out how to use it. This is like the NSA getting a private feed of everyone’s Internet traffic in the early 2000s, but it’s the PRC seeing goals, keys, plans, confessions, … A lot of noise, but also there’ll be signal in there.

Countries without local-owned models & inference (“sovereign” for some value of the word) like New Zealand are destined to ship their citizens’ work and personal info overseas. NZ citizens and govt have already chosen its alignment by picking USA companies as SaaS providers.

That means it doesn’t matter if the inference happens in the US, because the results of the inference will almost always end up in gmail, Google Drive, Dropbox, Figma, etc. etc. US govt has access to US inference providers as much as US SaaS hosters.

Cheap Chinese inference challenges that.

If we infer with Tencent and save in Google Drive, Tencent gets a copy of what we’d store in Google Drive. And the context background material. Which means the PRC can access it.

Having chosen our poison (US) there should be concern in govt and defence about how we don’t take a second dose (CN).

Trade will be threatened if NZG overtly discourages Chinese model use. I imagine they’ll be watching the USG measures to see what China will tolerate vs what results in smackdowns.

Imagine an extreme situation and then work backwards …

NZG bans CN inference APIs on national security grounds. You can’t ship your LLM requests to a model owned or operated by a Chinese company or subsidiary.

Suddenly shipments NZ milk powder, beef, fish, and kiwifruit are all being inspected and a higher number sent back for bogus cause.

NZ exporters lose money, pressure NZG, suddenly there’s domestic and international pressure. Tencent threatens to move games development offshore for the NZ games companies it bought. Jobs threatened, exports threatened – what govt can stand firm against that because of infosec concerns?

NZG can mandate the equivalent of Five Eyes-hosted inference for NZG workloads, and the contracts issued by NZG. NZG could subsidise domestic inference to guarantee sovereignty, but that requires many millions of infrastructure buildout and “data center” is now a poisonous phrase.

NZG are sinking megabucks into “defence” but that feels like USG pressuring allies to buy weapons from US manufacturers. Economy and security deeply intertwined, as always.

I wonder what USG’s response would be to NZG investing in data centers not just warships, and counting that in the defence budget. That’s science fiction, of course, because current NZ pro-defence politicians all want photo ops beside missiles on battleships. A concrete rectangle isn’t photogenic.

There are options short of a complete ban. I wonder what the thinking in the halls of NZG is. I wonder how that compares to Australia (where Amazon et al. already have data centres) and US (where business interests and national security interests seem to align).