Energy & Resources

Stern measures

Stern Hu, an Australian national who works as Rio Tinto’s top iron ore negotiator, was arrested last week on suspicion of espionage.

So state secrets were comprised?

The Chinese media suspects that Rio Tinto and other major international ore suppliers might have bribed local executives to get access to stock levels, as well as production schedules and volumes. For the data to leak out now places China at a disadvantage during price talks on future ore supplies.

China is vulnerable to economic espionage, worries the Global Times, as it lacks the legislation to protect sensitive commercial information. The government and companies must work out what constitutes a trade secret, and how best to protect that information.

Yes, the definition of state secrets is certainly unclear, says The Melbourne Age and the Wall Street Journal agrees that just about any information deemed to harm the economic interests of the state can be classified as secret in China, even information that is publicly circulated and then withdrawn.

Cases of this type are not especially new, says Reuters. Historically, mainland Chinese who have taken foreign citizenship are particularly vulnerable to detention.

More to this than meets the eye?

The Beijing Morning Post was first to report that Chinese steel industry executives had also been arrested, most likely for divulging information critical to the price negotiations.“China has chosen to continue to wage a hard war against mining industry hegemons,” it reports.

In fact, the “whole steel industry has been bribed,” says the China Daily, in what has become “unwritten industry practice”. Sixteen Chinese steel mill executives are now caught in the net.

The Australian press definitely thinks so. The Sydney Morning Herald says the breakdown of the Chinalco deal must have played a part, as well as “the disregard bordering on contempt for China’s strong concerns about the BHP-Rio Pilbara joint venture.”

Other newspapers point to internal tensions within the Chinese negotiating team. In particular, industry observers see Beijing as wanting to toughen the Chinese position, as some of the steel mills had begun to break ranks to negotiate unilaterally with the iron ore suppliers.

A major test for Sino-Australian relations?

ChinaStakes.com is worried about how it all looks, and that the timing of the arrests seems “nothing if not suspicious”. China is the only major iron ore importer still to sign a contract for iron ore supplies. The world’s business community will be watching this case with great concern.

Not really, says the People’s Daily, reporting Chinese Foreign Ministry spokesman Qin Gang’s view that this is just one individual case that should not affect overall China-Australia relations.

The greatest test of Kevin Rudd’s prime ministerial career so far, agrees The Australian. He cannot afford to damage relations with Beijing (and has played up the fact that he understands China). But he must avoid a reputation as a “panda hugger” at home.

The problem is that all of this has got so public, reports the Sydney Morning Herald. It makes it much harder for Beijing to back down, especially now it is known that President Hu Jintao personally approved the investigation that led to the arrests.


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