Posted by: Bruce Einhorn on July 9, 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.