In the News: First Chinese Ruling on AI Model Hallucination Tort; EU Companies Review Chinese Supply Chain; and China Pushes AI Innovation Within Tight Rules

The pledge by an AI platform to compensate for misinformation was held unenforceable by a Chinese court. | A survey finds that most EU firms are reviewing their supply chains in China. | China is demanding innovation while enforcing strict content and data compliance rules.

By Jeffrey Tse

First-Ever Court Case on AI Model “Hallucination”

The Hangzhou Internet Court has issued a ruling in the country’s first AI "hallucination" tort dispute.

In the lawsuit, the plaintiff, surnamed Liang, began to use an unnamed AI model created by the defendant. On June 29, 2025, Liang asked about information related to applying to a particular high school, and the AI model replied with inaccurate information.

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