Chinese companies are aggressively developing autonomous vehicles. In August, China announced that it had issued 16,000 test licenses for driverless cars and opened up about 20,000 miles of roads nationwide for autonomous vehicle testing.

But Chinese autonomous vehicle companies have also quietly been testing their technology on U.S. streets.

Baidu, Didi, WeRide, Pony.ai and AutoX all have offices in northern California, right alongside many U.S. autonomous car outfits. Collectively, these five companies logged over 1.6 million test miles on California's roads between 2017 and 2023, according to data from the California Department of Motor Vehicles, which is responsible for issuing test licenses for companies aiming to test autonomous cars in the state. Out of these five companies, Didi, is the only one that no longer has an active AV testing permit according to the DMV's website.

Michael Dunne, CEO and founder of consulting firm Dunne Insights, told CNBC that China had "carte blanche" when it comes to testing AVs in California.

"They recognized that Silicon Valley was the cradle of autonomous vehicle technology," Dunne said, adding, "They hired a lot of people who had previously been working for Apple or Tesla or Waymo or Cruise and said, 'Let's get the best talent in the world. We have funding, and we want to build a world-class company. Take that knowledge, bring it back to China, apply it to our massive home market, and we're off and running.'"

But now, concerns about the massive amount of data being collected by these cars and the potential implications for national security have led the U.S. government to propose a ban on Chinese connected vehicles.

Missy Cummings, a former senior safety advisor to the National Highway Traffic Safety Administration, told CNBC the ban was a good start.

"These vehicles are very much surveillance machines," Cummings said. "They have multiple cameras looking at everything from many different angles, and they can do the same pattern every day, over and over and over again, under the guise of testing."

Cummings added that the vehicles gather "critical information that may not seem confidential, but certainly is sensitive, about patterns of life, about vehicles that go in and out of certain installations, about how we actually do supply chains."

Representative Marc Veasey of Texas told CNBC he is also concerned. Last year, he and three other representatives wrote a letter to the Biden administration, detailing their fears that Chinese autonomous vehicles operating in the U.S. pose threats to national security and competitiveness.

Feeling the increased scrutiny, Chinese autonomous car companies have been pulling back from the U.S.

At the peak of Chinese AV testing, Dunne told CNBC there were more than 14 companies testing their vehicles in California, Nevada and Utah, but today, Dunne said he sees "very little evidence or intention among Chinese autonomous vehicle makers to launch products in the United States."

"There's a recognition," he said. "'Oh, we had a nice run in the United States. We learned a lot. From here forward, maybe we have enough that we can build our own innovation inside China.'"

Watch the video to find out more about how these AV companies are testing their vehicles on California's roads and what impact the increased scrutiny around Chinese connected vehicles could mean for the industry in the future.