China Helps Evaders of Sanctions, Export Controls at 'Industrial Scale,' US Panel Says

While sanctions and export controls have “disrupted specific networks, increased costs, and at times stymied access to key technologies at least temporarily, China continues to facilitate evasion at an industrial scale,” the report says. “U.S. and multilateral sanctions regimes face significant challenges given China’s large economy, domestic manufacturing capabilities, extensive trade relationships, opaque customs and legal systems, and global financial connectivity -- particularly through Hong Kong.”

China buys cheap sanctioned oil from Iran and Russia, giving them an important source of revenue. It is also the largest supplier of restricted dual-use items to Russia’s war machine and helps North Korea launder the proceeds of its transnational cybercrime.

"China is the decisive enabler of sanctions evasion by the so-called 'axis of autocracy' countries," the report says. "China undertakes persistent actions facilitating evasion of broad-based U.S. and multilateral economic sanctions, financial sanctions, and export controls as a means of growing its influence with the other axis countries, ensuring they can continue their destabilizing activities supported by China and limiting the power and effectiveness of the economic isolation toolset and thereby U.S. policy."

To counter such activity, the commission believes the U.S. and its allies should adjust their approach. “In order to be more effective, the United States and like-minded countries will need more coherent, unified, and likely aggressive responses to China’s role in sanctions and export control evasion,” said the commission, which plans to make several specific recommendations on this topic in its annual report scheduled to be released Nov. 18.

One of China’s key sanctions evasion tools is its network of entities allowing Russia, Iran and North Korea to conduct transactions outside the U.S. financial system. Other sanctions evasion tools include barter trade, cryptocurrency, money laundering and a shadow fleet of tankers.

China’s export control evasion tools include shipping controlled goods directly to Russia, Iran and North Korea; transferring technology and production to those countries; and enabling the transshipment of dual-use items, such as semiconductors, ball bearings and machine tools. "Chinese and Hong Kong entities serve as vital transshipment hubs -- often purporting to be final buyers of export-controlled products yet passing the controlled goods along to fellow axis countries or routing such sales through multiple third-country markets," the report says.

The commission's annual report recommendations are expected to draw partly on the hearings it has held over the past year. At a February hearing, a former Treasury Department official called for boosting resources for sanctions enforcement and increasing coordination among agencies involved in “economic statecraft" (see 2502200054). A former National Security official testified that the U.S. could better enforce three North Korea sanctions laws it enacted to deprive Pyongyang of revenue for its nuclear weapons and ballistic missile programs.

Congress is considering legislation to address evasion. An amendment to the Senate-passed version of the FY 2026 National Defense Authorization Act would require the executive branch to develop a strategy to counter deepening cooperation among U.S. "adversaries" in such areas as sanctions evasion and the sharing of restricted dual-use technology (see 2510100015).