Recently, US Secretary of State Blinken issued a warning during his visit to China, stating that if the Chinese Communist Party (CCP) does not cease supplying Russia with power products used in the manufacturing of military weapons for the assault on Ukraine, Washington will take sanctions action. A significant amount of data indicates that Hong Kong has become a crucial link in the supply chain for the CCP to provide high-tech products to Russia.
Analyzers believe that the CCP has bound Hong Kong and mainland China together, eliminating Hong Kong’s role as an intermediary. Blinken’s visit to China should be seen as a final negotiation as if the CCP continues to support Russia, a US-China trade war is inevitable, leading to further severe sanctions that will likely include Hong Kong.
During a meeting with Chinese Foreign Minister Wang Yi on April 26, Blinken expressed serious concerns about the CCP providing power components to Russia. He emphasized that China is the largest supplier of machine tools, semiconductors, and nitrocellulose, with nitrocellulose being crucial for manufacturing ammunition, rocket propellants, and other dual-use military and civilian items that Moscow uses to enhance its defense industry base.
In a subsequent press conference, Blinken stated, “These components are aiding Russia’s brutal aggression against Ukraine.” He warned that if the CCP does not address this issue, the US will take action.
A large amount of data indicates that Hong Kong has become a key link in the supply chain for the CCP to provide high-tech products, including semiconductors, to Russia.
Reports from 2023 revealed that Hong Kong had acted as a transit center in Russia’s illicit procurement network, transferring Western-manufactured microelectronic components to enterprises linked to the Russian military. Since Russia’s invasion of Ukraine, Hong Kong’s exports of integrated circuits have surged, with semiconductor exports in 2022 reaching approximately $400 million, ranking second only to mainland China. Many of these transactions violated US export control laws regarding trade with Russia.
Data provided by Indian research firm Export Genius shows that in Russian semiconductor import records for the period between February 24 and December 31, 2022, in 3,292 transactions valued at a minimum of $100,000 each, products manufactured by US chip makers accounted for approximately 70%, totaling 2,358 transactions with a combined value of at least $740 million.
Of these transactions, 1,774 (around 75%) were shipped from Hong Kong or mainland China. Many of the shippers were small to medium-sized companies, with some being newly established after Russia’s invasion of Ukraine. The total value of these transactions reached $570 million, representing a tenfold increase in US chip exports from Hong Kong and mainland China to Russia before the start of the Russia-Ukraine conflict.
According to data provided by the Washington-based non-profit organization Silverado Policy Accelerator, from March 2022 to December 2022, China and Hong Kong together accounted for nearly 90% of all chip exports to Russia in terms of transaction value.
Based on data from the Washington-based non-profit research organization C4ADS, analyzing Russian customs data, the shipment volume of Russian semiconductors sharply increased in the first half of last year, with many being transported through Hong Kong to sanctioned countries.
Based on Bloomberg’s data analysis, from January to May last year, over two hundred Russian enterprises received 17,000 chips worth $25 million from US semiconductor company Texas Instruments Inc. (TI). The two largest recipients of TI chips, NPP Itelma and VMK, had their chip shipments processed by two Hong Kong companies. These companies were sanctioned by the US in October 2023 for supplying military-related companies in Russia.
TI and another US semiconductor company, Analog Devices, have both denied selling chips directly to entities in Hong Kong.
Six months after Russia’s invasion of Ukraine in 2022, the number of newly registered companies in Hong Kong with names containing “Russia” surged.
The grassroots organization “Local Studies Society,” specializing in Hong Kong’s development, discovered through a review of new company registrations and name changes with the company registry that from Russia’s invasion of Ukraine on February 24, 2022, to October of the same year, 35 new companies with names containing “Russia” or “Russia” had been registered in Hong Kong. During the same period in 2021, only 13 such companies had registered, indicating a noticeable uptrend.
The “Local Studies Society” believes that the numbers of company registrations reflect a deeper economic connection between Hong Kong and Russia.
Furthermore, although companies involved in the alcoholic beverage industry make up the majority in these lists, there are also a significant number of companies engaged in relatively sensitive industries, including agriculture, chemicals, energy, and finance.
In October 2022, Sherman Yan, managing partner at ONC Lawyers in Hong Kong, stated that some major Russian companies, including state-owned enterprises, were seeking collaboration with Hong Kong law firms to establish a presence in jurisdictions perceived to be more “friendly” than New York and London.
Yan mentioned that his firm had preliminary discussions with Russian clients, with several companies seeking to change certain registration items to Hong Kong while maintaining their operations in Russia.
Since the 2019 anti-extradition movement, the CCP’s tightening grip on Hong Kong has intensified, causing the high degree of autonomy promised under the Basic Law to fade. Since Russia’s invasion of Ukraine, the Hong Kong government has blatantly disregarded Western sanctions under the CCP’s authorization, purposely relaxing export controls.
A report from the Carnegie Endowment for International Peace indicated that Hong Kong’s traditional role as a neutral trade hub connecting the East and West no longer holds, with clear evidence that Hong Kong is aligning itself with the new Sino-Russian axis and no longer belongs to the non-aligned camp vis-a-vis the Western world.
On March 29, the Biden administration announced a revised regulation to prevent the CCP from acquiring US AI chips and chip manufacturing equipment, which took effect swiftly on April 4 after being published within a week.
This extensive 166-page amendment includes restrictions on chip exports to China and limitations on notebook computers containing these chips. Indications suggest that these restrictions may extend to lower-end mature chip production processes.
Senior media personality Shi Shan stated that the CCP has firmly linked Hong Kong and mainland China together, eliminating Hong Kong’s role as a super-connector. He emphasized that with the gradual tightening of China’s access to high-tech products by the US, a US-China trade war is imminent, leading to severe trade sanctions against the CCP and Russia, particularly in the high-tech sector, which will inevitably involve Hong Kong. “As the super-connector role diminishes, it’s highly probable that Hong Kong will suffer more significant damage in the future.”