So now it’s official. China has formally arrested four Rio Tinto employees, including Rio’s chief iron-ore negotiator, Australian citizen Stern Hu and three Chinese employees, on charges of obtaining trade secrets and commercial bribery, making it more likely the highly-politicised case will be brought to trial.
That, in the view of most observers, is a good thing.
The four employees were detained in early July on charges of stealing state secrets, a far more serious allegation that could have brought with it a death sentence, and one that both Rio and the Australian government refuted. The lesser charge of stealing “trade secrets”, as opposed to “state secrets”, signals a backdown by Beijing on the whole affair.
In fact, ventures the FT, the apparent reduction in charges “may be the result of frantic behind-the-scenes lobbying by Australian diplomats as well as public pressure from other governments and numerous business groups who have said the case will have a chilling effect on foreign investment into the country”.
We’ve already commented this week on some of China’s odd moves on this case. But whether the hapless Rio staff have been slapped with a lighter charge or not, their formal arrest, coming as it does on the brink of a $3.1bn bid by one of China’s biggest coal miners, Yanzhou Coal Mining Co, for Australian coal producer Felix Resources, is not likely to win China any brownie points in Canberra.
The $3.1bn bid, if realised, will have to go before Australia’s Foreign Investment Review Board, and ultimately to the Treasurer, Wayne Swan, for approval – none of whom, presumably, are planning Christmas holidays in Beijing.
In a statement on Wednesday, China’s onerously-named Supreme People’s Procuratorate (which – surprise, surprise, handles both prosecutions and investigations) said prosecutors had gathered sufficient evidence to formally approve the arrest of the four Rio employees – Stern Hu and the three other Chinese citizens: Liu Caikui, Ge Minqiang and Wang Yong – for “obtaining commercial secrets of China’s steel and iron industry through improper means”, in violation of the country’s criminal law.
The statement said prosecutors had also found evidence the four were involved in commercial bribery.
If convicted on these charges, the four face a fine and up to seven years in jail. But that’s a wonderful thing, apparently, because they would have faced the death penalty if convicted of violating China’s vaguely-worded state secrets laws.
This then, is what Beijing evidently sees as a “PR campaign” to counter some of the extremely negative publicity surrounding the Rio case. But, as Business Spectator’s Stephen Bartholomuesz notes on Wednesday:The reality is that they have been arrested and could be held, indeed imprisoned, for months while the Chinese authorities continue their investigations, with no certainty that China won’t decide at some point that commercial secrets are once again state secrets.
Concludes Bartholmeusz:
The unfortunate difficulty for the Chinese – and Australia’s Rudd government for that matter, however, is that – as was the case during the protracted and ultimately aborted attempt by Chinalco to acquire a position of pervasive influence in Rio that provides some kind of backdrop for China’s actions against the Rio executives — every decision they take will be assessed within the context of those actions, whether or not there is any actual connection.
Oh and one more thing to consider: China’s state media, according to the FT, reports that a number of other “suspects” from China’s iron and steel industry are also under investigation for providing commercial secrets to Rio Tinto.
Well then, we wish Yanzhou Coal Mining and Beijing’s mandarins all luck in Yanzhou’s bid to buy Australia’s Felix Resources.
Related links:
Business fears grow over harsh Chinese spy laws – FT
Rio’s Hu faces bribery, trade secret charges in China – Bloomberg