I'm a lot more worried about the US government than China's -- it has a lot more direct impact on my life and is largely controlled by billionaires who do not have good intentions toward the rest of us.
And, to me, this letter comes off as quite insincere. Stopping distillation can only be explained as an anti-competitive measure. Their own explanation is nonsensical -- they say is needs to be stopped to help prevent authoritarian governments from overtaking the US at the frontier of AI. But by its nature distillation lags behind the frontier. Not to mention the US is one of the authoritarian governments we need to be concerned with, and the next thing they advocate for is full, worldwide regulatory control of AI, which is rather heavily authoritarian.
These guys are making a $T gamble and need to screw over a lot of people very badly to make it pay off. You do not want to trust anything they say.