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Tuesday, Sep 22, 2020

US hi-tech goods shipped through Hong Kong to face closer scrutiny under new democracy legislation

City will be subject to tighter customs controls on ‘dual-use’ products that have both military and commercial applications. Washington is becoming increasingly concerned at China’s use of American technology, analysts say

The United States’ latest piece of legislation on Hong Kong will mean closer scrutiny of the trade in “dual-use” technologies to ensure the city is not used as a gateway for shipping regulated hi-tech American products to mainland China.

The move comes after US President Donald Trump on Wednesday signed into law the Hong Kong Human Rights and Democracy Act, which includes a reference to the sale of goods that have both military and commercial applications.

Under the legislation, Washington has the power to suspend Hong Kong’s special trading status if it is deemed to have lost a significant degree of autonomy from mainland China, as promised under the “one country, two systems” framework. As a result, the city will be subject to an annual assessment of the enforcement of export control laws that monitor and limit the sale of potentially sensitive products overseas.

The inclusion of dual-use technologies in the act comes at a time of growing concern in the US about Beijing’s rise as a global force in the tech sector that has also seen a crack down on technology transfers and greater scrutiny of academic partnerships between the US and China.

Under the act, the US commerce department is obliged to investigate whether controlled dual-use technologies are moving through Hong Kong to the mainland illegally. It mentions areas to watch, including China’s social credit system and mass surveillance programmes like the “Integrated Joint Operations Platform” used to monitor the largely Muslim population in the far western Xinjiang Uygur autonomous region.

Despite the appearance of the new stipulation in black and white, Louis Chan, head of the global research team at the Hong Kong Trade Development Council, said it was unlikely to have any real impact on Hong and US trade relations.

“The Hong Kong government takes the US’ concerns about compliance with the [export control] requirements seriously,” he said.

“Both the TID [Hong Kong Trade and Industry Department] and customs are already working hard to ensure Hong Kong is not used as a transshipment hub for people to bypass the export control laws.”

Chan said the city government introduced new rules to safeguard against violations two years ago, but added he was not surprised to see dual-use technologies included in the new act.

“Some of the core differences between these two world powers concern the transfer and trade of those sensitive technologies,” he said, adding that it was no surprise that Hong Kong had come under greater scrutiny because of its pivotal role in trade between China and the US.

Observers agreed that the inclusion of the export controls in the act was linked to Washington’s broader concerns about China’s use of its technology.

“Countries use export controls because they don’t want their technology to fall into the wrong hands,” said Henry Gao, an associate professor of law at Singapore Management University.

“The specific items listed in the act refer to equipment used for mass surveillance and the social credit [system], which is a big concern for the US,” he said.

Besides the human rights implications, the systems could give China “an edge in the development of artificial intelligence” as they would enable the government to accumulate much more data, he said.

Helena Legarda, an analyst with the Mercator Institute of China Studies in Berlin, said the public was particularly concerned about the use of the technology given recent leaks of documents detailing the role of surveillance in human rights abuses in Xinjiang.

“[But] in general, the issue of dual-use technologies has become a very important issue in the US- China trade dispute,” she said.
“The idea is that China has been exploiting the openness of our systems to get access to European and American [dual-use] technology and transfer it back to China, benefiting both Chinese companies, and its military and security establishment.”

Governments were becoming increasingly concerned about how China might apply dual-use technologies as their understanding of their possible uses had grown, Legarda said.

The European Council earlier this year agreed to evaluate export control mechanisms that could deny mainland China, Hong Kong and other territories access to certain European surveillance technologies.

The US began tightening its definitions of controlled dual-use technologies last year in a move towards incorporating emerging technologies like artificial intelligence.

Under US law, exports of products and technologies capable of enhancing China’s military capabilities are not permitted, and companies can be blacklisted from buying US tech products.

Such a penalty was handed down to Hangzhou Hikvision Digital Technology and Zhejiang Dahua Technology last month for what the US said were their roles in human rights violations against Muslim minorities in Xinjiang.


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