Alibaba has banned its employees from using Anthropic's Claude Code at work after the AI tool triggered scrutiny for features that could identify China-linked users. This ban is part of an escalating dispute between Alibaba and Anthropic, stemming from Anthropic's accusation that Alibaba illicitly extracted its AI model capabilities. The conflict highlights the intense race between the US and China for dominance in artificial intelligence. Claude Code, Anthropic's AI coding assistant, had gained popularity among Chinese developers despite access restrictions. To prevent further alleged "distillation" of its advanced capabilities, Anthropic had implemented measures within Claude Code to inspect user environments. These measures included detecting timezone and proxy information, which developers found concerning. An Anthropic employee acknowledged these features were an experiment to combat account abuse and model distillation. While direct enforcement of restrictions on individual users in China proved challenging, companies are now more aware of the legal risks. Consequently, Chinese AI firms are increasingly favoring domestic and open-source models. Meanwhile, Chinese AI models are becoming competitive in the US market due to their significantly lower cost and comparable performance.