A bipartisan group of lawmakers is warning that Hong Kong has become a haven for Beijing to mask its financial involvement in violent conflict and human rights abuses inside China and around the world. Leaders in Congress are now urging the Trump administration to take stronger action in light of China’s failure to respect Hong Kong’s freedom and autonomy.
When the United Kingdom agreed to hand over control of Hong Kong to Beijing following more than 150 years of colonial rule in 1997, it was under the provision that Beijing would allow the territory to maintain its capitalist system, legal structure, and civil liberties for 50 years under the “one country, two systems” framework. In reality, Beijing quickly asserted complete control, violating the terms of the agreement.
But because of the veneer of independence, Hong Kong initially enjoyed a special trade status with the United States and other Western countries. This arrangement allowed Hong Kong to be treated as a separate customs and economic territory from mainland China. It could import and export goods, sign trade agreements, and host financial institutions without being subject to the same tariffs, export controls, or political scrutiny imposed on Beijing.
The U.S. Hong Kong Policy Act of 1992 explicitly granted these privileges as long as Hong Kong remained “sufficiently autonomous” from China. However, after the Chinese Communist Party (CCP) implemented the 2020 national security law and began severely curbing Hong Kong’s political freedoms, the U.S. under the first Trump administration determined that the territory no longer had meaningful autonomy.
In response, Trump revoked Hong Kong’s special status, effectively treating it the same as mainland China for trade and export purposes — ending the advantage it once enjoyed.
Recent revelations suggest that the situation in Hong Kong has deteriorated even further in recent years, to the point where the city has now become a central hub for organized crime, including money laundering and smuggling. From a shining light of economic prosperity under British rule, Hong Kong has now become a hotbed of illicit activity under Chinese dominion.
The Trump administration has already taken some action to address this festering crisis, including imposing sanctions on six Chinese officials who “have engaged in actions or policies that have degraded the autonomy of Hong Kong, including in connection with transnational repression targeting individuals residing in the United States.” That action came in response to Beijing’s crackdown on pro-democracy voices last year that landed 45 activists and former lawmakers in prison for as long as 10 years for participating in a primary election.
Late last month, Ranking Member Raja Krishnamoorthi (D-IL) and Chairman John Moolenaar (R-MI) of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party also sent a letter to Treasury Secretary Scott Bessent “regarding how a Primary Money Laundering Concern (PMLC) designation could address money laundering involving Hong Kong entities.”
“Since 2020, the territory has increasingly been exploited by the PRC as a platform for financial crimes that directly threaten U.S. and allied national security interests, while advancing the goals of our adversaries,” Krishnamoorthi and Moolenaar wrote. “Hong Kong’s erosion of regulatory standards under Beijing’s control has made it a global epicenter for illicit finance – and without swift action, U.S. companies, allies, and our national security will continue to pay the price.”
The smuggling of goods through Hong Kong to U.S. adversaries like Iran and Russia plays a key role in allowing those nations to threaten American interests and the security of the West.
According to Russian customs data, from February 24, 2022 – the start of the Ukraine war – through the end of that year, 75 percent of semiconductors (necessary for military equipment) imported into Russia originated from Hong Kong or mainland China. During the second half of 2023, Hong Kong sent nearly $750 million worth of sanctioned goods to Russia, effectively keeping Moscow’s war machine running. These shipments of chips, data receivers, computer processors, and digital storage devices, many of which were manufactured in Japan, South Korea, and the United States, enabled Russian drones, missiles, and communication systems to remain operational.
According to a 2023 report, shipments of U.S.-made chips from Hong Kong to Russia jumped “tenfold” following Russia’s invasion of Ukraine. One Russian company operating out of Hong Kong shipped integrated circuits, essential for advanced communication used in “ground and navy radars” and “electronic warfare systems.” Another company dispatched 17 shipments, valued at $1.23 million, of banned goods, including advanced graphics cards, processors, and other electronic components, to Russia in just one month.
Sunny Cheung, a fellow at the Washington, D.C.-based Jamestown Foundation, called Hong Kong “Beijing’s financial aircraft carrier projecting power far beyond the Chinese borders.”
Hong Kong-based firms have also been rebranding and exporting sanctioned Iranian oil as well as wheat crops stolen from Ukraine, along with facilitating transactions that enable Tehran to purchase electronic components for its drone and missile industry. Ships registered in Hong Kong have even delivered sanctioned Iranian oil to North Korea. Billions of dollars’ worth of cryptocurrency has also been laundered through the city’s exchanges to Pyongyang to support its weapons program.
Dr. Yunteng Qian, a former high-ranking CCP member involved in the Party’s operations in Hong Kong and Taiwan who defected to the West in the 1980s, told me that Chinese President Xi Jinping – who was present during the negotiations with the U.K. to hand over Hong Kong – never intended to allow the territory to retain any degree of autonomy.
“At that time, former CCP leader Deng Xiaoping ordered the drafting of an emergency plan for Hong Kong and Taiwan. They needed to quickly learn how to rebuild them if the West ruined them with sanctions. It was said then that the effort would involve the dark and clean economies,” Dr. Qian said. “I can see that Xi is applying some parts of this plan now.”
More action could soon be coming on this front in the U.S. House. Rep. Joe Wilson (R-SC) has introduced a resolution “to require a determination and report relating to money laundering and violations of export controls and sanctions in Hong Kong.” That measure, if passed, could dramatically ramp up U.S. pressure on China’s use of Hong Kong as what Moolenaar described as a “back door for Beijing’s illicit financial operations.”
As Beijing turns Hong Kong into a financial weapon for its global ambitions, America faces a clear choice: either confront this corruption at its source or allow China’s shadow economy to keep financing tyranny abroad. Congress’s latest push suggests Washington is finally ready to act.
Ben Solis is the pen name of an international affairs journalist, historian, and researcher.
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