alt Hacker NewsA Chinese company has less incentive to use US customer's data than a US company does. Does a Chinese company have an incentive to steal national secrets or cause disruption? 100%. But any firm or project that has national secrets should be vetting everything and using in-house software anyway. And if not, then if I were China I'd be trying to breach the makers of the software (in this case Anthropic,OpenAi,etc).
For the average person, China doesn't care about you or me. For a US company, US citizens are their gold mine.
If anything, the competition from a Chinese company will reduce a US company's possible profits. That's the threat. That's why Chinese EVs are banned in the US and why Chinese LLMs are next.
Just because something is made in China does not make it a threat to the US. The US trades all sorts of goods, produce, etc with China. The traded goods can be poisoned at any time. At what cost? Well we wouldn't be able to trade anymore. And that hurts both sides. But once a foreign nation does something better than a US firm, the US will put up a ban to protect its own stock market. This isn't new.
We are talking about a ban on Chinese AI on federal agencies. The concern isn't about the general citizen data, but private federal information and secrets, some of which could pertain to critical IT infrastructure. This is absolutely of interest to Chinese companies, but also, primarily, the CCP (or any potential enemy, really).
Restricting national secrets to only in-house software isn't guaranteed to provide better security (you still need to hire security specialists), but is guaranteed to spend resources in hiring sufficiently qualified personnel to maintain said software while ignoring the pool of potentially better qualified teams already hired by national companies. So, an alternative, is to use private contractors with different levels of secret sharing. This kind of choice isn't trivial to make.
You seem to forgetting the bonus side of "The traded goods can be poisoned at any time." If the exfiltrated data is more worth than the repercussions that are going to emerge out of it, then it's absolutely worth it. And this isn't specific to China. China holds a similar perspective to US in this regard, but with foreign services in general (arguably more strict, given it affects the entire populace). You just can't know when a third party will go rogue, do they take a more conservative approach of producing "locally", with private companies they can punish if they go against their interest. The current US government, ironically, is good evidence of this.