U.S. Department of State, "Country Reports on Terrorism 2008," April 30, 2009

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China

China increased counterterrorism cooperation with the United States and other nations both leading up to and following the August Olympic Games in Beijing. In March, China hosted the U.S.-China Counterterrorism Dialogue aimed at increasing cooperation on counterterrorism. China also held counterterrorism exercises with neighboring countries, including Thailand and India. As a founding member of the Shanghai Cooperation Organization (SCO), China has made counterterrorism one of the SCO’s main objectives. China continued to participate in the Container Security Initiative (CSI) with U.S. Customs and Border Protection inspectors stationed at the ports of Shanghai and Shenzhen.

In October, the U.S. and China marked the ten year anniversary of the Joint Liaison Group (JLG) on Law Enforcement Cooperation with a plenary meeting in Washington, DC. The seven working groups of the JLG are aimed at increasing policy dialogue and improving cooperation writ large between U.S. and Chinese law enforcement agencies.

Although implementation of the Yangshan Deep Water Megaports project was underway by the U.S. Department of Energy (DOE), the General Administration of China Customs (GACC) told DOE that it would increase the number of scanners used in the project. In October, GACC told DOE that contacts on Megaports would be suspended until further notice due to unrelated issues. The status of implementation of the Yangshan Megaports project was unknown at year’s end.

China's cash-based economy and robust cross-border trade contributed to a high volume of difficult-to-track cash transactions. Though mechanisms were in place for tracking financial transactions in the formal banking sector, the large size of the informal economy, prevalence of counterfeit identity documents, and large numbers of underground banks presented major obstacles to law enforcement authorities. According to International Monetary Fund statistics, money laundering in China may account for as much as $24 billion per year.

Terrorist financing is a criminal offense in China, and the government has the authority to identify, freeze, and seize terrorist financial assets, but laws defining terrorist financing were not yet consistent with international standards, according to reporting by the Financial Action Task Force. China's Financial Intelligence Unit (FIU), housed within the People’s Bank of China (PBOC), worked closely with the Financial Crimes Enforcement Network (FINCEN) in the United States to develop its capabilities. In addition to its domestic collection and analysis activities, the FIU exchanged information with foreign FIUs on a case-by-case basis. Coordination in this area could be further enhanced through China’s membership in the Egmont Group, an umbrella body that coordinates the activities of over 100 FIUs worldwide. Though China has applied for membership in the Egmont Group, domestic political concerns about Taiwan's participation in the organization have reportedly hampered membership discussions.

China expanded its role in international efforts to combat terrorist finance and money laundering by becoming a full member of the Financial Action Task Force (FATF) in June 2007. Since 2004, China has also been a member of the Eurasian Group (EAG), a FATF-style regional grouping that includes China, Russia, and several Central Asian countries.

Despite a series of violent incidents and threats leading up to the Beijing Olympics, the Games were held successfully without terrorist incidents. Starting in June, representatives of a group calling itself the Turkistan Islamic Party (TIP) posted videos on the Internet taking credit for violent incidents in China and threatening to strike the Olympic Games. TIP is believed to be an another name for the Eastern Turkistan Islamic Party (ETIP), also known as the Eastern Turkistan Islamic Movement (ETIM), which was added by UN 1267 Committee to its Consolidated List of individuals/entities associated with Usama bin Laden, al-Qa’ida, or the Taliban on September 11, 2002. Among the incidents TIP took credit for was a series of bus bombings in Kunming, Yunnan Province that killed two people in July. In March, the Chinese government claimed that flight attendants foiled a plot to detonate a homemade explosive on a flight from Urumqi, Xinjiang to Beijing by subduing a female passenger.

Human rights organizations have accused China of using counterterrorism as a pretext to suppress Uighurs, a predominantly Muslim ethnic group which makes up the majority of the population within the Xinjiang Uighur Autonomous Region (XUAR) of western China. In the lead up to the Olympics, China tightened security in Xinjiang, instituting road checkpoints and arresting people it suspected of being linked to terrorism. In July, the Urumqi, XUAR Public Security Bureau in Urumqi declared that it detained 82 terrorists during the first six months of the year while police in Kashgar claimed to have rounded up 12 terrorist groups.

Security forces maintained a high-level of vigilance both in Xinjiang and throughout the country during the Olympics. In spite of this, a series of violent incidents did occur in Xinjiang during the Olympics which the Chinese government has blamed on terrorist organizations. In the most violent reported incident, 17 People's Armed Police Border Guards were killed on August 4 when assailants attacked them with a vehicle, homemade bombs, and knives. Formally established in 2002, the FBI Legal Attaché Office in Beijing bolstered U.S.-China cooperation on counterterrorism investigations. China provided substantive intelligence in some cases, but more work remained to be done in terms of the depth and overall responsiveness to U.S. requests. Another incident in Xinjiang seven days later resulted in two deaths when a series of homemade bombs were detonated in the remote Xinjiang town of Kuqa.

Hong Kong

Hong Kong's position as a major transit point for cargo, finances, and people and its open trade and financial regime made it a potential site for money laundering and terrorist financing activities. The high level of cooperation and the successful implementation of the Container Security Initiative (CSI) by Hong Kong Customs officials received continued praise from visiting USG delegations, which described it as a model for CSI implementation. The Hong Kong government extended the Strategic Freight Initiative (SFI) pilot project, originally scheduled to run through April 2008 for an additional year.

Hong Kong law enforcement agencies provided full support and cooperation to their overseas counterparts in tracing financial transactions suspected of being linked to terrorist activities.

Hong Kong actively participated in various anti-money laundering and counterterrorist financing initiatives, including the Financial Action Task Force (FATF) and the Asia/Pacific Group (APG) on Money Laundering. Hong Kong is a member of the Egmont Group, reporting through its Joint Financial Intelligence Unit (JFIU), operated by Hong Kong Police and the Customs and Excise Department. The results of Hong Kong's 2007 FATF and APG mutual evaluation were announced in June 2008. In response to recommendations in the report, Hong Kong authorities are expected to propose legislation to increase supervision of money changers and remittance agents, but have made no plans to establish reporting requirements for cross-border currency movements.

Macau

The Macau Special Administrative Region is a member of the Asia Pacific Group (APG) and completed a mutual evaluation of its Anti-Money Laundering Regime in 2007. In response to recommendations contained in the report, Macau authorities have taken steps to improve compliance with suspicious transactions reporting requirements in banks and casinos, but the threshold reporting limits remain well above international norms. Macau's Financial Intelligence Office (FIO) remained a temporary body, although its staffing continued to increase. Macau has not proposed establishing reporting requirements for cross-border currency movements.

The Government of Macau continued to exchange information with the Hong Kong Special Administrative Region and counterparts in mainland China. Additionally, Macau cooperated internationally in counterterrorism efforts, through INTERPOL and other security-focused organizations within the Asia Pacific Region, and considered information sharing mechanisms that would enable it to join the Egmont Group.