Hong Kong appears to be emerging as a hub of sanctions evasion, especially with regard to sensitive technologies. A joint report from Reuters, iStories, and the British think tank RUSI has noted that Hong Kong is currently functioning as a nexus of attempts to evade global sensitive technology-related sanctions. Per the report, a large number of sanctions-evading providers of advanced microelectronics—used in Chinese military technology and Russian UAV procurement—are technology companies based in Hong Kong, some of which have had a previous history of illicitly supplying the Chinese military with banned equipment. This follows an earlier announcement by Chief Executive John Lee —following the arrival of a sanctioned Russian super yacht in Hong Kong— that the Hong Kong government would not comply with or enforce US sanctions.
Since 2020, the U.S. government has moved proactively to restrict the export of restricted technologies to Hong Kong. Amid escalating attempts by the U.S. and its allies to limit China’s access to sensitive technologies, Hong Kong may emerge as a key battleground. Following the Biden Administration’s introduction of a set of aggressive export restrictions on semiconductors and microelectronics, the Chinese government has announced a $143 billion funding package for the country’s domestic semiconductor industry. Some of this money is likely to pass through Hong Kong, especially if the lax international attention that has allowed Hong Kong to function as a hub of pro-Russian sanctions evasion continues.