China Detains Rio Tinto Workers

Posted by: Bruce Einhorn on July 09, 2009

While the world’s media are rightly focusing on the brutal ethnic clashes in Xinjiang, the arrest of a handful of people thousands of miles away from Urumqi could end being a bigger concern for companies doing business in China. A spokesman from China’s foreign ministry today confirmed that four Shanghai-based employees of Rio Tinto, the Anglo-Australian mining giant, are under arrest, with spokesman Qin Gang saying one of the Rio Tinto employees is “suspected of stealing state secrets.” As the Associated Press points out, the arrests come in the midst of contentious talks between Rio Tinto and Chinese companies over the price of iron ore. The AP is careful to add that “there has been no indication whether the case is linked to the negotiations,” but it doesn’t require a great leap to see that the two are probably related. And Reuters is reporting that “computers, likely containing sensitive commercial information relating to iron ore contracts, have also been removed from Rio’s Shanghai offices.”

Stealing state secrets is a favorite charge of Chinese authorities, since just about anything in China could conceivably be a state secret. Remember Shi Tao, the Chinese journalist imprisoned for in 2005 after Yahoo China provided police with information about his email account? In an email, he summarized a government memo on how the media should cover the news; he got ten years for revealing state secrets.

The arrests come after an ugly falling out between Rio and the state-owned Aluminum Corp. of China, with a deal for the Chinese company to invest $19.5 billion in Rio collapsing last month after encountering opposition in Australia. The Aussie dollar slumped today on the news of the state-secrets accusation, with traders worried about the impact on bilateral relations. All this is terrible news not only for the four employees and their families but also for any foreign company hoping to do business in China. It’s hard enough for companies to negotiate deals in China without having to worry about whether their workers are going to find themselves in jail if some Chinese officials decide they don’t like the way the talks are going.

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Reader Comments

Henry L.

July 9, 2009 09:03 AM

Mr. Author. Do you really know if it's true if state was really taken? Based on your writing, you are basically saying that it's bogus charge without knowing the facts. If it was a chinese worker charged with stealing state secret I am sure your tune will be very different and will proclaim the chinese worker to be guilty. The whole arguement I guess is "white-man don't lie and do no evil" right?

Nobody

July 9, 2009 03:09 PM

Then just leave and don't do business with them.

Katherine

July 9, 2009 05:42 PM

Appeasing the Chinese because of their market size has given an heartless communist government freedom to do almost anything without the world saying anything back. As their economy grows bigger, they will get more bold and continue this behavior. Unfortunately, no one will say anything back to fight this. Oh well, good thing I live in a democracy, even though it isn't perfect.

Max

July 10, 2009 12:09 AM

Henry, for your information, the Rio Tinto employee under suspicion for stealing state secrets is a Chinese-born Australian by the name of Stern Hu. He looks very Chinese to me, not white.

Steven

July 10, 2009 12:27 AM

Stealing China's commerical secret is a common practice for MNCs in China. I know at least two Chinese officials were arrested for this case, one from Capital Steel, another one from Shandong Steel. More will follow up according to the related news in China. Bruce, you really need to do a lot more homework before your writing something about China. Those information is open to public in China. One news even detailed what kind of secrets were stolen by Rio.

Steven

July 10, 2009 12:55 AM

http://news.backchina.com/2009/7/10/gb2312_48336.html

Bruce, for your convenience, I give you this link. I take it granted that you should know some Chinese since your job is so much related with China. Read it and tell us what you think. DO you still believe “there has been no indication whether the case is linked to the negotiations,”???

peace4all1

July 10, 2009 04:26 PM

First, I'd like to thank Steven for providing the Chinese link. For the benefits of other non-Chinese readers, I’d try to explain it as follows. This extra Chinese info did confirm what I suspected that this is a simple case of collusion of greedy Western Capitalists with some corrupt Chinese officers at the expense of Chinese National interests while the amount involved could be up to many billions dollars more.
It's OK as a business strategy for a seller to squeeze out as much money as possible from a buyer by smartly and legally figuring out the current inventory level of the buyer has in order to gauge its opponent’s negotiation strength. But when the seller form Rio Tinto obtained the current Chinese Iron Ore national storage level and negotiation strategy illegally via bribing Chinese officers, it will be considered as illegal against the law of any country. According to this Chinese article, this has been going on for many years in the past. And that is why despite its huge buying power, China has not been able to gain advantage during the past negotiations with commodity producers.

Elvis Esparza

July 10, 2009 07:37 PM

Assuming that the arrested individuals were not stealing "state secrets" nor had they bribed anyone on China's die, and what most in the West think is happening that this is retaliation for Rio Tinto and a negotiating tactic, then it makes sense for China to take such action. These negotiations do involve tens of billions worth in iron, and said iron is important to both Australia and China (perhaps mortally so). Since politicians and public opinion played a major role (perhaps decisively) in having Rio Tinto change its mind regarding Chinalco with their protectionism and thinly veiled anti-Chinese racism, it's only natural that the Chinese want payback. They did give heads up notice to Australia that there will be consequences for double-crossing China. The message they are sending out to the world is twofold. One don't mess with China unless you are willing to pay the price. Second, China does not forget insults to the middle kingdom (this one should have been obvious, their whole culture references the past (philosephers, emperors, generals, bandits, concubines, mandarins, etc) when it comes to teaching lessons, strategies, morals, etc and when it comes to remembering the humiliation by the Japanese & Europeans).

James Baker

July 10, 2009 11:51 PM

This is the Chinese government hitting back. I feel sorry as an American to see employee's of a company being targeted, however the Chinese government is known to do such things. Chinese don't have a strand of fairness in their DNA. China boasts of a 5000 year old history, unfortunately not even 24 hours during that period, were of any form of democracy.

Joe

July 11, 2009 12:20 AM

this is totally bull. Chinese and American businessmen are frequently charged by FBI for spying on secrets or smuggling goods, so does this mean China should stop doing business with US? Same things happen everywhere in the world.

Jian

July 11, 2009 06:42 AM

US should free Madoff, He is a good man, a good US citizen, a good, and honest Jawish businessman.

David

July 11, 2009 08:18 PM

This a good lession for those Chinese believe their foreign employers will look after them if anything happens. No, they will use you and get what they want, and when something happens, you will be on your own. After all, you are a dispensible employee from overseas... who cares.

People like Bruce, the so called Asian expert, would be much better writing something about 'how to use a word - processor', instead of making comments about China. You have no idea what you are talking about, and just write something that suits white peoples taste. It must be very hard to make a living as a writer. Just to let you know that Rio Tinto is looking for a China expert Shanghai CEO replecement if you are interested.

Aussie Spy...

July 11, 2009 10:42 PM

Actually, I think the jury is still out on what happened to these Rio guys. But normally, we Aussies have a different path. I have been spying on behalf of my mining company in the US, China, and Russia. As we Aussies are, I expect when I retire I shall get a splendid pension from all these governments. For Australia, for a job well done. For US, China, and Russia, because they are so clueless that they actually congratulated me on passing their commercial secrets to my employer. How a wonderful life.

ChinaWillWin

July 12, 2009 01:01 AM

Once again, the reports from all western media covering Xinjiang violence showed their collective evil-wishing on China. The violence, the cruelest form of killing on innocent people on the street by Uyghur muslim mobs were described as peaceful demonstrators. The police response to the killing and arson was described as suppression. Ribiya Kedeer, a pure criminal, was again and again invited to White House and US congress, and dubbed as "freedom deciple". Bin Laden followers were now turned into favorite protected guests just because they were terrorists again China's interest, not US any more.

ChinaWillWin

July 12, 2009 01:05 AM

Bruce, people like you can blind some of the English reading only readers. Your bias and arrogance will only earn more despise on you

ChinaWillWin

July 12, 2009 01:26 AM

Katherine, it is you don't have a brain to know what is happening in China instead of communists are hearless. Who cares where you like to live. One thing is, almost all Chinese people are glad, they don't live in a democracy called "India".

anonymous

July 12, 2009 04:55 AM

The arrests bring the impotency of australia and resource companies in the open.

The business continues as usual. Obviously, Australian resource companies do not have the courage to do anything as to walk away, etc.

Laoji

July 12, 2009 10:23 AM

"Xinjiang, the arrest of a handful of people thousands of miles away from Urumqi could end being a bigger concern for companies doing business in China". Bruce, are you implying that all companies doing business in China are engaged in illegal activities?

Downs

July 13, 2009 11:34 AM


This is amazing !

Everytime, a westerner breaks law in a non-west country, the west and its media screams as hell. To the west countries, it's almost like there is no law that is just enough to apply to them in any non-west country.

Just look at what happened to WorldCom, Enron, Global Crossing, Tyco, Bernard Madoff, and recently Allen Stanford. I wouldn't be surprised if it turns out that Rio Tinto is doing the same

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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