Chinese tech behemoth Alibaba has banned its employees from using Anthropic's Claude Code at work, as per multiple media reports. The news about Alibaba stopping its employees from using the popular AI-powered coding software comes shortly after a post on Reddit last week alleged that Anthropic had added hidden spyware in Claude Code that could identify users who were using the software from China.
“Claude Code checks whether you have a proxy enabled — and if so, covertly transmits, through invisible alterations to the system prompt, whether you are in China, whether you are proxying to a Chinese URL, and whether you are affiliated with a Chinese AI lab. Anthropic further attempted to obfuscate this code within the Claude Code binary,” the Reddit post alleged.
Soon afterwards, Anthropic's Thariq Shihipar confirmed in a post on X that the code was part of an "experiment" to prevent account abuse by unauthorised resellers and protect the company's models from distillation attacks.
“This is an experiment we launched in March that was meant to prevent account abuse from unauthorized resellers and protect against distillation,” wrote Shihipar.
“The team has landed stronger mitigations since then and we’ve actually been meaning to take this down for a while. We merged the PR and this should be fully rolled back in tomorrow’s release,” he added.
As per reporting by Chinese publications, Alibaba has classified Claude Code as "high-risk software" and employees will be barred from using the popular AI coding tool from July 10.
As per a Reuters report citing a person familiar with the matter, Alibaba employees have been instructed to stop using Claude Code for work and instead switch to the company's own AI coding platform, Qoder.
Just last month, Anthropic had claimed that Alibaba had attempted to extract the capabilities of its Claude models via distillation that required training a less capable model on the outputs of a stronger model.
In a letter sent to two US senators and reviewed by Reuters, Anthropic alleged that the effort was aimed at accelerating China's AI capabilities.
"Distillation attacks turn hundreds of billions of dollars in American investment and [research and development] into a massive subsidy for our geopolitical competitors," the company reportedly said.
Reportedly, Claude Code has been gaining popularity in China despite the geopolitical restrictions that Anthropic has in place.
The person also reportedly said that Anthropic's restrictions on accessing Claude Code were difficult to enforce on individual users who can deploy servers in the United States and make it look as though the traffic originated there. However, larger companies are said to be more cautious about the compliance and legal risks.
The tensions between the US and China in the AI race have been heating up, with American companies like Anthropic and OpenAI still managing to take a lead in the AI model race, but Chinese giants like Alibaba, Zhipu AI and DeepSeek showing that they aren't far behind either.
Aman Gupta is a Digital Content Producer at LiveMint with over 3.5 years of experience covering the technology landscape. He specializes in artificial intelligence and consumer technology, reporting on everything from the ethical debates around AI models to shifts in the smartphone market.
His reporting is grounded in first-hand testing, independent analysis, and a focus on how technology impacts everyday users. He holds a PG Diploma in Radio and Television Journalism from the Indian Institute of Mass Communication, Delhi (Class of 2022).
Outside the newsroom, he spends his time reading biographies, hunting for the perfect coffee beans, or planning his next trip.

You can find Aman on https://www.linkedin.com/in/aman-gupta-894180214">LinkedIn and on X at https://x.com/nobugsfound">@nobugsfound, or reach him via email at aman.gupta@htdigital.in.
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