Good morning. Chinese artificial-intelligence developers have found a way to use the most advanced American chips without bringing them to China.

• Getting around export controls. Chinese developers are working with brokers to access computing power overseas, sometimes masking their identity using techniques from the cryptocurrency world. The tactic comes in response to U.S. export controls that have prevented Chinese companies from directly importing sought after AI chips developed by U.S.-based Nvidia. While it is still possible for Chinese users to physically bring Nvidia’s chips to China by tapping a network of gray-market sellers, the process is cumbersome and can’t supply all the needs of big users.
   
• A background in crypto. One entrepreneur helping Chinese companies overcome the hurdles is Derek Aw, a former bitcoin miner. He persuaded investors in Dubai and the U.S. to fund the purchase of AI servers housing Nvidia’s powerful H100 chips. In June, Aw’s company loaded more than 300 servers with the chips into a data center in Brisbane, Australia. Three weeks later, the servers began processing AI algorithms for a company in Beijing.
   
• KYC requirements. Renting far away computing power is nothing new, and many global companies shuffle data around the world using U.S. companies’ services such as Google Cloud, Microsoft Azure and Amazon Web Services. However, those companies, like banks, have “Know Your Customer” policies that may make it difficult for some Chinese customers to obtain the most advanced computing power.
  
  The buyers and sellers of computing power and the middlemen connecting them aren’t breaking any laws, lawyers familiar with U.S. sanctions say. Washington has targeted exports of advanced chips, equipment and technology, but cloud companies say the export rules don’t restrict Chinese companies or their foreign affiliates from accessing U.S. cloud services using Nvidia chips.

Cannabis reclassification would expand banking access to industry, advocate says.

A congressional advocate for the federal legalization of cannabis says changes are coming that could lead to better access to banking services for companies that grow or sell the drug.

The co-founder and co-chair of the Congressional Cannabis Caucus, Rep. Earl Blumenauer (D., Ore.) has pushed to liberalize marijuana laws throughout his political career. Elected to Congress in 1996, Blumenauer says recent moves by the Biden administration toward rescheduling cannabis from a Schedule I drug—alongside substances such as heroin and LSD—to a less restrictive Schedule III drug will open opportunities for the growing industry, which is legal in some form in 38 states, but still not under federal law.

Blumenauer spoke to Risk & Compliance Journal's David Smagalla about legislation that would allow cannabis businesses to open accounts at federally insured banks, get small-business loans and accept debit-card payments, among other things, services many banks might avoid offering the industry for fear of criminal liability.

The latest statement by French authorities raises the stakes in a struggle between governments and digital companies over their responsibility for illegal activity on their platforms. France’s investigation is examining 12 potential criminal violations, including complicity in the spread of child pornography, refusal to cooperate with authorities and complicity in fraud. Investigators haven’t named Durov or anyone else yet as the target of their probe, according to the statement. The prosecutors said they have 96 hours, or until Wednesday, to hold Durov for questioning.

• Kroger and Albertsons went to court Monday to defend the largest supermarket merger in history from antitrust enforcers who say it would create a colossus that could raise prices on consumers and stifle wage increases for workers.

IBM shuts China R&D operations in latest retreat by U.S. companies.

IBM is shutting down its China research and development department, the latest retreat from the country by top U.S. technology companies.

The company is moving its China R&D functions to other overseas facilities, Jack Hergenrother, an IBM executive, told employees at a virtual meeting on Monday morning, according to employees who attended. Hergenrother said IBM faced intensifying competition in China with its infrastructure business declining in the past few years, the employees said.

Geopolitical tensions between the U.S. and China have led many multinational companies to reassess their business in China, with some laying off employees and relocating operations to other countries.

The disconcerting signal behind China’s epic bond rally. 

In recent weeks, bond traders have been piling into the perceived safety of Chinese government bonds, driving an epic buying spree that has pushed yields on the benchmark 10-year note, which move inversely to prices, to record lows.

The rally has elicited an unusual response from China’s central bank, which is responsible for managing the state treasury and maintaining financial stability: Stop buying these notes.

The central bank says it is worried that a sudden reversal of the bond rally could incur steep losses for smaller lenders snapping up the notes, a kind of Chinese rerun of last year’s Silicon Valley Bank debacle in the U.S.

• Canada will slap hefty tariffs on imports of Chinese electric vehicles, steel and aluminum, positioning itself with allies including the U.S. to protect domestic manufacturing.
   
• Canada also plans to tighten rules on bringing in temporary foreign workers as it rolls back pandemic measures that were aimed at tackling a labor shortage in the country.
   
• Elliott Management laid out its plan to fix Southwest Airlines in an open letter to shareholders Monday, saying it plans to meet with the airline’s representatives Sept. 9 in its proxy fight against the company.
   
• The CEOs of JPMorgan, Bank of America, and other big banks weigh in frequently on issues from immigration to tariffs but almost never contribute directly to presidential campaigns. There is little to gain by endorsing a candidate, executives say.
   
• German consumer sentiment has weakened once again, as a one-off boost from the European soccer championship in the country faded, compounding concerns that Europe’s largest economy will fail to mount a sustained recovery this year.
   
• Russia struck sites across Ukraine with what Kyiv called the biggest aerial bombardment of the war, inflicting damage to the country’s already-strained energy infrastructure and prompting calls from Ukraine for Western allies to help it strike back.

• Hezbollah leaders say they are done with retaliation against Israel for the July killing of a senior leader in Beirut for the time being. Now, all eyes are on Iran.
   
• A federal judge in Florida made a series of grievous errors and ignored decades of precedent when she dismissed the case charging Donald Trump with illegally retaining classified documents after he left the White House, special counsel Jack Smith told an appeals court Monday.
   
• Ken Griffin, the founder and chief executive of Citadel, plans to break ground on his new 1.7 million-square-foot Miami headquarters in the third quarter of 2025.
   
• A showdown over America’s bestselling rifle is heading to the Supreme Court this fall: Gun-rights groups are asking the court to consider whether the AR-15 and other rifles described as assault weapons are deserving of constitutional protection.

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