Hong Kong has always played a unique role as an entrepot in Sino-Western commercial relations. It is a popular gateway for both Western and Chinese companies to operate in and out of China due to its semi-autonomous status and free economy. However, less apparent is Chinaâ€™s interest in using Hong Kong to achieve its military and political objectives.
The United States has maintained strict export control over dual-use technologies to China for national security purposes, even though it has normalized trade with China in 2000. The controlled list includes high-powered computers, telecommunications equipment with encryption capability and mobile phone technology CDMA. Satellites and licenses for crime control and detection equipment are also prohibited. Hong Kong, even with its handover to China in 1997, isÂ exempted from these policiesÂ on the basis of its separate legal system and strict export control regime. According to Hong Kongâ€™s constitution, although the PRC is responsible for Hong Kongâ€™s defence and foreign affairs, no department of the Chinese government can interfere with the affairs of Hong Kong. However, with its lack of universal suffrage and economic dependence on China, Hong Kong has become more vulnerable to Beijingâ€™s pressure. These trends can pose a risk to Americaâ€™s export control.
The Department of Defense has reported that the PLAâ€™s transformation into an information-based, network-centric force requires legal and illegal acquisitions ofÂ high tech productsÂ such as software, integrated circuits, electronics, and information security systems. Recently, the US â€“ China Economic and Security Review Commission pointed to Chinaâ€™s Military Intelligence Departmentâ€™s role in facilitating technology transfers and conducting industrial espionage activities throughÂ operating Hong Kong-based companies. Some well-known enterprises in Hong Kong, like the Lippo Limited, are closely linked to families of PLA officials. Furthermore, cases of illegal export to China have often involved Hong Kong as aÂ transshipment point. Currently, illegal transfer of such technologies is not easy to do because of Hong Kongâ€™sÂ rigorous customs control. However, the US-China Economic and Security Review Commission have reported accounts of Hong Kongâ€™sÂ customs standards slipping. With Chinaâ€™s increasing influence over Hong Kongâ€™s affairs, it is worrying whether their influence would make these standards further deteriorate.
Under the Hong Kong Policy Act of 1992, the US has been monitoring the developments of Hong Kong with annual reports since 1997. Yet, with the last of such report released in 2007, the attention level appears to have dwindled. Since Hong Kongâ€™s export control exemption is based on its semi-autonomous status from China, its ability to withstand pressure from China will be important in determining the direction of U.S. export control and trade policies towards Hong Kong and China.