Hong Kong's Reversion to China

The United States has restricted exports of technology with possible military applications to China while allowing shipments of these same items--including titanium alloys, machine tools, and high-performance computers--to Hong Kong. Although the British colony reverts to Chinese control in July 1997, the United States has no plans to change its export policy toward Hong Kong, raising concerns about increased Chinese access to sensitive, dual-use technology. GAO concludes that monitoring Hong Kong's export controls is critical to assessing the risk to U.S. nonproliferation interests. This may not be easy because of the changes that could occur in Hong Kong and the difficulties in gauging Chinese intentions and behavior. However, changes in the composition and volume of U.S. exports of controlled items to Hong Kong could signal attempts by the Chinese to obtain sensitive technology, such as optical sensors, that China had previously been denied.

GAO noted that: (1) U.S. export control policy toward Hong Kong is less restrictive than that applied to China, based on Hong Kong's ability to protect sensitive technologies as well as concerns over China's proliferation activities; (2) the U.S. government allows Hong Kong greater and easier access to sensitive dual-use technologies; many items may be exported to Hong Kong without prior Commerce Department review and, even when prior approval is necessary, licenses are readily granted; (3) thus, exporters may export items such as titanium alloys, certain types of machine tools, and high-performance computers to Hong Kong without obtaining an export license; (4) in contrast, the export control rules applied to China are more stringent: more categories of exports require licenses, and the U.S. government has refused to export certain items owing to concerns over proposed end users and end uses; (5) in about 30 instances over the past 3 years, items that the United States has refused to export to China could have been exported to Hong Kong without prior U.S. government review or approval; (6) the U.S. government does not plan to change its export control policy toward Hong Kong after it reverts to China unless there is evidence that the Hong Kong authorities are unable to continue to operate an effective export control system; (7) as a result, Hong Kong will continue to have easier access to sensitive technology that is more tightly controlled for China; (8) major reasons for this decision include: (a) the Hong Kong Policy Act, which calls for continued separate treatment of Hong Kong in export controls so long as it is able to protect U.S. technology and equipment; (b) the U.S. government's overall commitment to supporting Hong Kong's continued autonomy; and (c) Hong Kong's record in maintaining an effective export control system; (9) given the decision to continue current U.S. policy toward Hong Kong, monitoring various indicators of Hong Kong's continued autonomy in export controls becomes critical to assessing the risk to U.S. nonproliferation interests; (10) this may not be an easy task, given the changes that could occur in Hong Kong and the difficulties in gauging Chinese intentions and behavior; (11) key indicators to watch would be changes in the composition and volume of U.S. exports of controlled items to Hong Kong, which could signal efforts by China to obtain sensitive technology such as optical sensors that it has previously been denied; and (12) the U.S. government has begun a process to develop a baseline of export data against which to measure such changes but may have difficulty in doing so because of data limitations.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: