China’s customs agents told Nvidia’s H200 chips are not permitted, sources say

Chinese customs authorities told customs agents this week that Nvidia’s H200 artificial intelligence chips are not permitted to enter China, according to three people briefed on the matter.

Chinese government officials also summoned domestic technology companies to meetings on Tuesday, January 13, where they were explicitly instructed not to purchase the chips unless necessary, two of the people and a third source said.

“The wording from the officials is so severe that it is basically a ban for now, though this might change in the future should things evolve,” one of the people said.

Beijing’s motives unclear

The H200, Nvidia’s second most powerful AI chip, is one of the biggest flashpoints in current US-Sino relations.

Though there is strong demand from Chinese firms, it remains unclear whether Beijing wants to ban it outright so that domestic chip companies can flourish, or is still chewing over restrictions, or whether these measures could be used as a bargaining tactic in talks with Washington.

The chip, formally approved by the Trump administration for export to China this week with some conditions, is also a hot-button issue in the US, with many China hawks concerned that the chips could supercharge the Chinese military and erode the US advantage in AI.

The sources, who spoke on condition of anonymity due to the sensitivity of the matter, said authorities had not provided any reasons for their directives and had not given any indication whether this constitutes a formal ban or a temporary measure.

Reuters was not immediately able to ascertain whether the directives applied to existing orders for H200 chips or only to new orders.

China’s General Administration of Customs, the Ministry of Industry and Information Technology and the National Development and Reform Commission had not responded to Reuters requests for comment at the time of publication. Nvidia also did not reply to Reuters queries.

A bargaining tactic?

The Information on Tuesday reported that the Chinese government this week told some tech companies it would only approve their H200 purchases under special circumstances, such as for research and development conducted in partnerships at universities.

Exemptions are being discussed for R&D purposes and universities, said one of the sources.

Analysts say Beijing’s move could be aimed at exerting leverage on Washington in the run-up to US President Donald Trump’s April visit to Beijing to meet with Xi Jinping as both sides navigate an uneasy truce on trade.

“Beijing is …. pushing to see what bigger concessions they can get to dismantle US-led tech controls,” said Reva Goujon, a geopolitical strategist at research firm Rhodium Group.

Keen to stifle China’s AI and technological development, the US has since 2022 placed restrictions on exports to China of high-end chips.

Last year, Trump banned and then allowed exports of a much weaker chip, the H20. But then Beijing de facto blocked those sales from around August, prompting Nvidia CEO Jensen Huang to say the company’s share of the AI chip market in the world’s second-largest economy had shrunk to zero.

The H200, however, delivers roughly six times the performance of the H20, making it a highly attractive product.

While Chinese chipmakers have developed AI processors like Huawei’s Ascend 910C, the H200 is considered far more efficient for large-scale training of advanced AI models.

Chinese technology companies have placed orders for more than two million H200 chips priced at around $27,000 each, far exceeding Nvidia’s inventory of 700,000 chips, sources said last month.

It remains debatable, however, which side has more to gain from the sales of H200 chips to China.

Re-entry into the Chinese market would mean huge profits for Nvidia and the US government, which will take a 25% fee on the chip sales.

White House AI czar David Sacks and others have also argued that exporting such chips to China discourages Chinese competitors from redoubling efforts to catch up with Nvidia’s most advanced chip designs.

“(Beijing) believes the US is desperate to sell AI chips to China, so it believes China has the leverage to extract concessions from the US in exchange for license approvals,” said Chris McGuire, senior fellow for China and emerging tech at the Council on Foreign Relations think tank. – Rappler.com