China Moves to Rein in NVIDIA H200 Chips — a New Fault Line in the AI Race

China is considering new measures to regulate how many advanced artificial intelligence chips domestic companies can import from overseas suppliers such as Nvidia, according to people familiar with the discussions as reported by Nikkei Asia. The move reflects Beijing's attempt to strike a careful balance between supporting its rapidly growing AI sector and accelerating the adoption of homegrown semiconductor technologies.

The deliberations come after Washington signalled it would allow Nvidia to sell its advanced H200 AI chips to China, a reversal that reopened a channel for one of the world's most sought-after processors to reach Chinese buyers.

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A Controlled Opening Rather Than a Free-For-All

While the US decision removes a major export barrier, Chinese authorities appear keen to avoid unrestricted purchases that could weaken long-term efforts to build a self-sufficient chip ecosystem. Sources say Beijing is exploring rules that would cap the overall volume of cutting-edge foreign AI chips that local companies can buy, effectively permitting limited imports instead of imposing a blanket ban.

Under the emerging framework, initial approvals for H200 purchases could be issued as early as the end of this month. However, companies would reportedly be required to justify why the chips are necessary, and authorities may decide which firms qualify and how many units they can acquire.

Officials have also been holding frequent meetings with major technology groups to assess how foreign chips are currently being used and why domestic alternatives cannot fill certain roles.

Quotas to Boost Domestic Alternatives

One option under discussion is the introduction of quota-style limits that would govern the ratio of imported chips to locally produced ones used by companies. Although no final policy has been announced, such a system would ensure continued demand for domestic suppliers even if Nvidia's H200 is approved for sale.

Beijing has also sought feedback from tech firms on their interest in Nvidia's next-generation Blackwell processors, which have yet to receive US authorities' clearance for export to China. The consultations suggest policymakers are trying to anticipate future demand while preventing excessive reliance on foreign hardware.

China's caution reflects concerns that a surge in imports could slow the momentum of local champions. Companies such as Huawei Technologies, Horizon Robotics and Cambricon have expanded their market presence as geopolitical tensions limited Nvidia's access to Chinese customers.

A group of emerging players, including Moore Threads, MetaX, Biren Technology and Suiyuan Technology, are also vying for a share of the fast-growing AI chip market.

NVIDIA Caught Between Demand and Geopolitics

NVIDIA executives have acknowledged the uncertain outlook. Chief executive Jensen Huang recently said that while the H200 remains competitive in China, its advantage will not last indefinitely, adding that newer architectures would need to reach the market in time.

Chinese technology giants such as Alibaba, Tencent and ByteDance continue to favour Nvidia's AI server systems for their ability to support large-scale training, inference and simulation workloads. Demand remains strong despite political headwinds on both sides of the Pacific.

At the CES technology show in Las Vegas, Nvidia's chief financial officer Colette Kress said some Chinese customers had already submitted export licence requests following Washington's policy shift. She added that US authorities were actively reviewing those applications.

Balancing Openness with Self-Reliance

Even if imports are approved, Chinese companies are expected to continue purchasing domestic chips to align with Beijing's localisation goals. Industry insiders say many firms anticipate being required to support local suppliers alongside any foreign purchases.

For Beijing, the challenge lies in maintaining access to world-class computing power without undermining its strategic push for semiconductor independence. As China weighs tighter controls on Nvidia's H200 chips, the outcome is likely to shape the next phase of competition between global and domestic AI hardware makers.