Hong Kong: on the road to become US export control's loophole?

Posted on Friday, April 30, 2010 by Evelyn Kusnawirianto

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 China’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, is exempted from these policies on the basis of its separate legal system and strict export control regime. According to Hong Kong’s constitution, although the PRC is responsible for Hong Kong’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 Beijing’s pressure. These trends can pose a risk to America’s export control.

The Department of Defense has reported that the PLA’s transformation into an information-based, network-centric force requires legal and illegal acquisitions of high tech products such as software, integrated circuits, electronics, and information security systems. Recently, the US – China Economic and Security Review Commission pointed to China’s Military Intelligence Department’s role in facilitating technology transfers and conducting industrial espionage activities through 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 a transshipment point. Currently, illegal transfer of such technologies is not easy to do because of Hong Kong’s rigorous customs control. However, the US-China Economic and Security Review Commission have reported accounts of Hong Kong’s customs standards slipping. With China’s increasing influence over Hong Kong’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 Kong’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.

Image:Satellite is one of the things prohibited from exporting to China under US export control laws.

Under the Radar News 5.1.10

Posted on by Evelyn Kusnawirianto

A weekly compilation of underreported developments in Asia

  • China’s Shanhaiguan Shipbuilding Industry Co. Ltd has started the construction of two major repair docks that would be part of the largest ship repair base when finished. The total industrial output value is expected to rise 41 percent when the two new docks enter into operation.

  • Japan plans to carry on full-scale exploration for seabed resources including rare metals at its Exclusive Economic Zone. China, Taiwan and Japan all claim sovereignty over waters around the Diaoyutai/Senkaku Islands.

  • Taiwan has held the biggest military maneuvers in over a year on Thursday, deploying more than 6500 Taiwanese soldiers assisted by F-16 fighter sets and Super Cobra attack helicopters.

  • South Korea has announced completion of the world’s longest seawall. The 33.9 kilometre seawall will be used to create a new city focused on logistics, industry, tourism, leisure and floriculture.

  • Japan is seeking information and pricing about foreign engines to be used by the prototype aircraft needed for its fifth generation fighter program. Japan will develop its own fifth-generation fighter because the US government had banned the export of F-22s to Japan.

  • The Singapore Police Force has unveiled a masterplan to strengthen its coastal defense system. Sea barges, faster and more agile patrol boats, and better fences will be used to improve Singapore’s command and surveillance capabilities at sea.

  • Armed forces of Malaysia, Singapore, New Zealand, Australia, and the United Kingdom are taking part in a regional defense exercise through the Five Power Defense Arrangement (FPDA). The exercise is held in various locations in the Malaysian peninsula and the South China Sea.

  • China has agreed to build two new civilian 650-megawatt nuclear reactors in Pakistan. At the nuclear summit in Washington earlier in April, China has pledged its opposition to atomic weapons proliferation while supporting civilian uses.
  • Undersea Cables: Taiwan's Achilles Heel?

    Posted on Wednesday, April 28, 2010 by Matthew Hallex

    While a great deal of attention has been paid to hacking attempts against the computer networks of governments and large corporations, vulnerabilities in the physical information technology infrastructure are often overlooked. The backbone of modern communications, in particular the internet, is a network of undersea fiber-optic cables that carry voice and data information. These cables, spanning across oceans, play a vital role in connecting countries with the rest of the world and are inviting targets for attack during wartime. Taiwan’s dependence on a small number of such cables highlights the vulnerability of its submarine information infrastructure.

    Damage to these cables would slow Taiwan’s electronic communications with the rest of the world, disrupting international businesses and financial markets, as well as forcing Taiwan to rely solely on satellite communication. However, satellite links are more at risk of interception, which can compromise Taiwan’s communications during wartime. The economic impact would not be limited to Taiwan as the same cables also carry bandwidth for users throughout Southeast Asia.

    Submarine communication cables are also vulnerable to natural disasters and accidents. In 2006, an earthquake off the southern coast of Taiwan severed nine undersea cables and slowed the internet connection in Southeast Asia for weeks following the incident. Cables were also damaged by Typhoon Morakot in 2009, which slowed internet transmissions in Taiwan, Hong Kong, Singapore and the Philippines. Furthermore, as submarine cables are laid under global shipping lanes, they are vulnerable to damage by ships’ anchors as well as fishing trawlers’ nets.

    Allied navies used trawlers and submarine-delivered divers to cut German and Japanese submarine cables during the Second World War. China could employ similar tactics against Taiwan in the future. Due to the high cost of building onshore facilities to receive cables and trenches to protect cables from boats in shallow waters, four of Taiwan’s five submarine cables come ashore at either Fangshan or Toucheng. A RAND study assessed that attack on either location could have a “sudden and calamitous effect” on Taiwan’s communications. Proposed new cables connecting Taiwan with mainland China would also be highly vulnerable to Chinese disruption during a conflict. Cable repair would be unlikely during a conflict due to the risk to maintenance vessels in a hostile environment.

    As information warfare is likely to be part of any conflict in the Taiwan Strait, Taiwanese policymakers must be prepared not only for hacking attempts against government and commercial computer systems but also for attacks on the physical infrastructure that supports electronic communications. The fiber-optic network that connects Taiwan to the rest of the world is a prime target for attack and Taiwan will need to guard against sabotage as well as accidental damage to their submarine communication assets.

    Under the Radar News 4.23.10

    Posted on Friday, April 23, 2010 by Matthew Hallex

    A weekly compilation of underreported developments in Asia

  • Chinese and Indian diplomats have met to discuss the impact of Chinese hydroelectric projects on the flow of India’s Brahmaputra River. Concerns have been raised about the impact of Chinese dam projects on the flow of water and sediments vital to farmers who lived along many rivers in Asia including the Brahmaputra and the Mekong.

  • South Korea has announced plans to bolster its military presence in five islands along the west coast following the recent sinking of a South Korean patrol ship. This is a reverse of previous South Korean policy of reducing military presence in those areas by 2020.

  • A Taiwanese medical team has been deployed to Nepal to provide medical services to rural villages. Such moves are intended to bolster the soft power of Taiwan as part of efforts to achieve greater international recognition.

  • China has announced plans to establish state-level emergency rescue troops. These dedicated units will enhance the ability of the PLA to undertake non-traditional security missions including emergency response and disaster relief.

  • Several bombs were exploded at the site of a controversial dam project in northern Myanmar. The dam, which has been criticized by environmentalists and human rights activists, will displace 15,000 local residents when complete.

  • Indonesia’s state owned energy company has announced that it will stop importing oil by 2015. Investments in energy sector and the construction of new refineries will allow Indonesia to reverse trends which saw it become a net importer of oil in 2008.

  • Beijing is accepting applications for its first public elections. More than 1,400 people have applied online for a chance to run.

  • Thailand is the largest investor in Myanmar according to the Thai Board of Investment. Thailand has invested US$7.41 billion in Myanmar between 1988 and 2009 with over 80% of funds invested in the energy sector.
  • Polical Aftershocks from Yushu Earthquake?

    Posted on by Kelley Currie

    The death toll from last week’s massive earthquake in the Tibetan area of Yushu (Tibetan: Jyeku), in China’s Qinghai province, has now surpassed 2100. Even as dramatic rescues continue, the focus is shifting into reconstruction mode. As this process unfolds, Beijing has an opportunity to rebuild these devastated communities in a way that could facilitate a broader process of reconciliation. The question is: will China’s leaders grasp this opportunity to break from their habit of paternalistic, top-down policies towards the Tibetans?

    Yushu is one of the most culturally intact Tibetan communities in the People’s Republic of China (PRC). With a 97% ethnic Tibetan population, Yushu has experienced relatively little Han in-migration due to its remote location 4000 meters above sea level. This remoteness has also stifled economic development, making it one of the poorest parts of China. PRC rule also has been relatively less repressive in Yushu, especially compared to the neighboring Tibet Autonomous Region. Yushu’s Tibetan-run NGOs openly conduct innovative community-based development programs, many with support from international donors. More recently, however, the Chinese authorities have alienated the local population with an unpopular nomad resettlement program, and a more assertive security presence since the 2008 unrest in Tibet. There were three small non-violent anti-government protests in Yushu during 2008, and cultural tensions have surfaced during rescue efforts.

    While Tibetan quake victims are undoubtedly grateful for governmental assistance in rebuilding their lives, their gratitude will be short-lived if assistance is provided in the usual top-down fashion. Instead, Chinese officialdom should solicit Tibetans’ input on the best way to build an economically prosperous and culturally appropriate future for their communities. If Beijing is willing to support a community-based approach, they will find ready and capable partners among Yushu’s Tibetan-led civil society.

    The central government should also consider reconstruction as an opportunity for positive outreach to the Tibetan exile community, including its leadership. The Chinese government has made some initial gestures, including an unusually mild response to the Dalai Lama’s request to visit the area, and an offer to assist exiled Tibetans in making donations or traveling to assist relatives. Both Tibetans and the international community would view any concrete cooperation between Beijing and Tibetan leaders in Dharamshala -- such as through joint initiatives to assist quake victims -- as a welcome confidence building measure. Such cooperation could also spur a virtuous cycle of increased in international donor support for rebuilding efforts.

    Qinghai provincial authorities’ recent pronouncement that Yushu will be rebuilt as a high altitude eco-tourism destination and reports the government has ordered monks to leave Yushu are worrying signs that the old command-and-control model remains operative. Going forward, how provincial and central authorities handle issues of Tibetan participation in reconstruction planning and execution will say a lot about China’s intentions in Tibet.

    Photo: Reuters/alJazeera

    After the Coup: Kyrgyzstan’s Relations with China

    Posted on Friday, April 16, 2010 by Tiffany Ma

    The latest revolt in the former Soviet Union occurred just across China’s western border, raising concerns about Kyrgyzstan’s relations with the region following the disposal of the Bakiyev government. In particular, Beijing is monitoring the unfolding events and their potential impact on its restive Xinjiang province and economic interests.

    Perhaps of greatest concern is that destabilization or democratization in neighboring Kyrgyzstan may encourage the Uighur independence movement in Xinjiang. In the past, China has relied upon the Bishkek government to constrain the 50,000 strong Uighur minority, but if permitted, the population may seek a greater political voice. Furthermore, if the new government is unable to assert control or conduct peaceful elections, disorder could potentially provide space for the East Turkestan Islamic Movement (designated by Beijing as a terrorist organization) cells in Kyrgyzstan to mobilize.

    While Uighur traders provided a historic Sino-Kyrgyz link, bilateral trade has boomed with China’s recent economic growth, totaling $9.3 billion in 2008. As Chinese producers expanded beyond the domestic market, informal ‘shuttle trade’ across the border became more organized, and today, Chinese goods are abundant in Kyrgyz markets. It is unlikely that the new government will curb trade with China as imports of consumer goods have displaced indigenous small and medium production bases, making cross-border trade key for the availability of consumer goods. In Kyrgyzstan’s volatile political climate, a disruption in the availability of such goods would likely cause further unrest.

    China’s economic presence has also been felt in other sectors. Chinese corporations have invested in the electricity sector and are also prospecting for strategic resources such as uranium. Other companies are connecting the two countries by road and railway to the rest of the region. Without the energy wealth of its neighbors, Kyrgyzstan has benefited from the influx of Chinese investment. As Russia, Kyrgyzstan’s other leading investor, rolls back projects due to the strain of the global financial crisis, China has filled some of the vacuum. Days before the coup, a Chinese energy company was considering a $300 million deal, rivaling a soft loan offered by Russia. If Russia remains in a weak position to exert economic influence, Kyrgyzstan’s relations with China will remain an important priority.

    The continuing geostrategic significance of Kyrgyzstan to China and Russia is evident in the recent overtures of aid for the new government. However, the seemingly pro-Russian orientation of the new government – interim leader Roza Otunbayeva has already spoken with Prime Minister Vladimir Putin twice – may stoke Beijing's concerns over Moscow’s political influence in Bishkek and could flame existing tensions in the Shanghai Cooperation Organisation. At this time, some in Zhongnanhai are undoubtedly looking for reassurance that Sino-Kyrgyz relations remain “alive and kicking,” as characterized by Otunbayeva following the Tulip Revolution.

    Image: Supporters of the opposition have taken over government buildings and opposition leaders have formed an interim government. Source: BBC

    Under the Radar News 4.16.10

    Posted on by Evelyn Kusnawirianto

    A weekly compilation of underreported developments in Asia

  • Myanmar has started building 400-kilometer-long railroads across the nation. These railroad projects will connect the south with north, and east with west of the country, as well as ethnic minority states including Rakhine, Kachin and Shan.

  • A group of 35 Chinese government officials and tourists has arrived in Pyongyang. The group is the first of such tourist visits after China granted North Korea destination status in February, symbolizing closer ties between the two countries.

  • Malaysia’s Petroliam Nasional Bhd (Petronas) has announced the decision to halt gasoline supply to Iran. This is in response to its desire to safeguard business exposure in the US and to support US threats to sanction Iran.

  • Vietnam will adopt the Shinkansen system, the Japanese bullet train technology, to shorten travel times between its capital Hanoi and the southern commercial hub of Ho Chi Minh City from three days to six hours non-stop.

  • A new party called the Sunrise Party of Japan, headed by former Trade Minister Takeo Hiranuma, has been formed to prevent the incumbent Democratic Party of Japan from seizing a majority in the July upper chamber election. The potency of the new party is in question due to the policy differences between leaders Hiranuma and former Finance Minister Karu Yosano.

  • Chinese Vice President Xi Jinping has met with chief advisor of Taiwan’s Cross-Strait Common Market Foundation chief advisor Fredrick Chien to discuss cross-strait economic and trade exchanges.

  • The US Forces Korea announced that the Eight U.S. Army (EUSA) will be reformed into a field command unit to support the new Korea Command.

  • The North China Sea Fleet of the Chinese Navy conducted training for its new multi-functional fighter bombers.

  • Japan has questioned the intentions of the Chinese sending two submarines and eight destroyers on the high seas near Japan. China responded that they are part of the navy’s routine training in international waters and is no cause for alarm.
  • The Mekong's Murky Future

    Posted on Thursday, April 15, 2010 by Prashanth Parameswaran

    Last week, representatives from the Lower Mekong Basin (LMB) – Vietnam, Laos, Cambodia and host country Thailand – gathered for the first Mekong River Commission (MRC) summit to discuss the future of the Mekong, one of the world’s longest and resource-rich rivers.

    There was much to discuss. The river’s present state is dire, as a prolonged drought has reduced water to its lowest level in five decades. Its future is also in peril, as a ‘cascade’ of seven dams in China's Yunnan Province, as well as eleven others initiated by mainland Southeast Asian states, threatens to alter the river’s hydrology, block sediment flows critical to agriculture, disrupt fish migration patterns, and erode river banks by 2030. Rising sea levels pose a longer-term but equally potent threat. According to projections, a rise of 30 inches by 2100 could potentially swamp 20 percent of the Mekong Delta and 10 percent of Ho Chi Minh City. At risk is a fragile ecosystem that provides millions of people with critical resources for drinking, eating, and irrigation and is vital to the economic development of LMB countries.

    Leaders at the summit clearly grasped the gravity of the situation. Thai Prime Minister Abhisit Vejjajiva declared that the Mekong “will not survive” if LMB nations do not “take joint responsibility for its long term sustainability.” The four countries issued a declaration highlighting areas for “priority action,” including researching and addressing the impact of climate change and intensifying flood and drought management. China even released previously withheld hydro-meteorological data on its upper Mekong dams at a side meeting.

    Yet far bolder efforts are needed in the future to save the Mekong. China and Myanmar must become full members of the MRC and participate in cooperative water management. This will allow the MRC to finally compile comprehensive data from all riparian states and lead joint efforts to manage water levels along the river to avoid loss of life and crop destruction. Greater strategic thinking is needed in Laos and Cambodia about how to balance economic and environmental imperatives, rather than just viewing the Mekong exclusively as an opportunity for commercial gain.

    Mammoth infrastructure projects may be necessary, but they must be accompanied by more participatory planning to consult the millions they affect, as well as more detailed assessments about the certainty of economic benefits they may or may not bring. Increasing energy efficiency and promoting renewable energy must also be considered alongside large-scale infrastructure initiatives, since they are more economically and environmentally feasible options that will help enhance energy security in the long run

    Unless these steps are taken soon, the gloomy predictions by climatologists about the Lower Mekong Basin may crystallize into reality, with profound implications for surrounding countries.

    Under the Radar News 4.9.10

    Posted on Friday, April 9, 2010 by Matthew Hallex

    A weekly compilation of underreported developments in Asia

  • Malaysia has enacted a law to crack down on the shipment of equipment and materials that could be used for the production of weapons of mass destruction. The A.Q. Khan network purchased centrifuge components for the enrichment of uranium.

  • The People’s Liberation Army and the Ministry of Education will launch China’s first online military recruitment website. The website is designed to recruit college graduates as part of the effort to modernize the PLA.

  • South Korea has launched a public diplomacy campaign in the United States to promote its claims over Dokdo Island. Sovereignty over Dokdo is disputed between Japan, who refers to the island as Takeshima, and South Korea.

  • Indonesia is planning on adding illegal logging to its efforts to crack down on organized crime. The jungles of Indonesia face one of the fastest rates of deforestation in the world.

  • Taiwan has announced plans to send pair of indigenous goats and a pair of spotted deer to the mainland in an effort to improve cross-Strait ties. China gifted a pair of pandas to Taiwan in 2008.

  • The 22nd International Medical Instruments and Equipment Exhibition featured the new generation of PLA medical equipment. The modernization of medical equipment improves the capability of the PLA to deploy in support of a wide variety of missions.
  • Cheonan Sinking Highlights Naval Mine Threat

    Posted on Tuesday, April 6, 2010 by Matthew Hallex

    The South Korean Navy patrol ship Cheonan suffered a mysterious explosion and sank in the waters disputed between the two Koreas on March 26. While the cause of the explosion has yet to be determined, officials suggest that the vessel may have been the victim of a North Korean mine – either a relic of the Korean War or more recently laid by North Korean ships. North Korea maintains a large stockpile of mines and would be expected to use them to protect their coastline from attack during conflict on the Korean peninsula. Although an old technology, naval mines remain a potent threat to maritime transit as well as in potential theaters of naval conflict in Asia.

    Along with North Korea, China maintains an extensive arsenal of naval mines. Noting the success of mine laying in WWII and first Gulf War, People’s Liberation Army Navy (PLAN) strategists believe that mine warfare could play a significant role in China’s plans to defeat a technologically advanced American military. The PLAN is the only major navy to regularly practice mine-laying, conduct annual mine warfare exercises, and would likely make use of mines as part of its anti-access strategy in a cross-Strait conflict. Along the coast, mines could be deployed to blockade Taiwan’s harbors. Further offshore, mines could complicate anti-submarine efforts and restrict the maneuvering of warships making them more vulnerable to other forms of attack. The PLAN deploys submarines, surface combatants and aircraft capable of laying mines.

    If the U.S. became involved in a conflict in the Taiwan Strait, or other regional hotspots, mine warfare would be a major concern for the U.S. navy. Concerns have been raised over U.S. readiness for mine warfare. Although the Navy currently maintains a fleet of mine countermeasures ships, including four permanently based in Japan, these ships are aging and in demand for minesweeping in the Persian Gulf. To replace dedicated mine countermeasures ships, the U.S. Navy has designed a mine warfare module equipped with sea and aerial sensors and autonomous vehicles for the planned Littoral Combat Ship (LCS). The LCS, however, has faced serious production delays and cost overruns which may lead to the ships entering service later and in fewer numbers, thereby restricting the ability of the U.S. to cope with the naval mine threat. Despite attention on new anti-access technologies such as nuclear submarines and ballistic missiles, naval mines remain a dangerous weapon. The United States needs to maintain and expand its ability to conduct mine warfare operations to meet potential challenges in Asia.

    Image:A German mine swept up in Australian waters during the Second World War.

    Under the radar News 4.2.10

    Posted on Friday, April 2, 2010 by Evelyn Kusnawirianto

    A weekly compilation of underreported developments in Asia

  • Thai Prime Minister Abhisit Vejjajiva has paid an official two-day visit to Bahrain this week to strengthen ties in economics, trade and investment with Saudi Arabia. They discussed ensuring reliable food supply chain to the Gulf Cooperation Council (GCC) region and combating separatist insurgency in its largely Muslim southern provinces.

  • The Kayin People’s Party (KPP) has registered to participate in the upcoming Burmese election, representing the ethnic minority group, Karen, in Burma. So far, the National League for Democracy has not changed its decision to withdraw from the election.

  • In an effort to stabilize the Xinjiang Uyghur Autonomous Region, Beijing has stepped up its work to improve economic and social condition of the region. Officials have been sent to Xinjiang to inspect social conditions and collect suggestions to improve livelihood and to promote ethnic equality and unity since late last year.

  • The Unified Communist Party Nepal (Maoist) has strengthened talks with political parties in Nepal in an attempt to overthrow the current coalition government. Nepal has so far been unable to achieve a peace process and constitution writing.

  • The Korean government has condemned Japan for passing five fifth-grade textbooks indicating Dokdo as Japanese territory. The dispute came at a time when the Democratic Party of Japan has expressed desires for better Japan-Korea relations.

  • Two hydropower dam projects, which are both invested by Chinese companies, broke ground in Cambodia this week. The projects are expected to lower power costs in Cambodia and reduce energy dependence on Thailand.

  • The United Nations will raise $374 million in the coming five years for cooperation projects with China in the areas of sustainable development, improving poor people’s lives, and international cooperation. The assistance and bilateral cooperation is much needed because there are still millions of people in China who live under one dollar a day.
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