Hidden Claude Code tracker sparks privacy backlash amid AI distillation clash

Anthropic secretly embedded a tracker in Claude Code to monitor users in China, calling it an 'experiment' to prevent abuse and distillation. A security researcher exposed the hidden data collection, prompting removal and fueling privacy concerns about surveillance in AI tools. The episode coincides with China‑U.S. tensions over model copying, with Alibaba banning Claude Code and policymakers weighing export controls and IP issues related to distillation.