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China’s Rio Tinto Arrests. Everyone Just Move Along….

Posted in Legal News

By Steve Dickinson
The recent detentions of four Rio Tinto executives has caused much concern. However, the situation has been misunderstood by most in the West because of a failure to understand the legal background.
The Rio Tinto employees are accused of conducting industrial espionage. Specifically, they are accused of bribery and theft of trade secrets. These acts are crimes under Chinese law. Therefore, if the accusations are factual, the four Rio Tinto employees are subject to criminal sanction in China, with typical prison sentences of up to four years.
The only thing unusual about this case is the decision of the Chinese government to treat the matter not as a commercial trade secrecy violation, but rather, as a theft of state secrets. I assume the reason for this is that the allegedly stolen information is in fact highly secret and damaging to the position of the Chinese companies in the iron ore price negotiations with Rio Tinto. The Chinese are probably avoiding a criminal trial so as to better maintain the secrecy of the information. The underlying issue, however, is that if the accusations are true, the Rio Tinto employees and their collaborators committed a serious violation of Chinese law. The choice of the government to follow the state secrets route should not obscure this fundamental fact.
What does all this mean for other companies doing business in China? This proceeding is actually not a sudden shift in Chinese policy. Foreign companies need to understand the fundamental fact that if you violate Chinese law you will be arrested and punished. There is no free pass because you are foreign or because you work for a foreign company.
The market data situation is quite common in China. The Chinese market is only partially open and operates according to rules different from the U.S. and Europe. This is particularly true with respect to free flow of information. Market information is carefully controlled by the Chinese government. Foreign companies are not permitted to do independent market analysis in China, and private Chinese companies are also strongly discouraged from providing such information.
Foreign companies operating in China therefore find the lack of market date to be a serious impediment to doing business in China. Since market data is not available from normal public sources, there is a strong temptation for foreign companies to collect data using questionable or openly illegal methods. Bribery of the target company’s accountant or bookkeeper is one of those common techniques. Though common, such practices are illegal and pose a significant risk of prosecution for a crime or worse. The Rio Tinto matter is an example of what constitutes “worse”.
Our advice is that foreign companies must strictly follow Chinese law. Commercial espionage is illegal in China. Theft of trade secrets and bribery are crimes. Many foreign business people think the worst that will happen if they engage in this activity is that they will be sued by their competitor. They are then surprised when they are greeted not by a process server but rather by a group of police officers who escort them to jail. Once they are in jail, there is little we attorneys can do to help. No commercial advantage is worth spending even one day in a Chinese jail, let alone being subject to the tender mercies of the state security bureau. The only sensible course of action is to avoid all such activity in China. If your business in China cannot be conducted without resorting to unlawful actions, leave China. It is that simple.
Dan’s Note: For more on business and crime in China, check out “Amazing Lawyers and The Criminal Side of China Business” and “Criminal Law and Business in China — A Strong Caution.” For more on the Rio Tinto case, check out this Wall Street Journal article and this New York Times article, both of which quote Steve on the case.

  • http://www.chinavortex.com Paul Denlinger

    There is another way you do not mention which is perfectly legal, and that is to commission a Chinese marketing company or market research company to do a survey or collect the data which foreign companies are not allowed to collect themselves.
    This is entirely legal according to PRC law, and does not violate any laws with regard to Chinese state secrets.

  • http://www.medivisas.com/ uk visa lawyer

    ‘No commercial advantage is worth spending even one day in a Chinese jail’.
    Succinct.

  • http://www.ceccato.info Fabrizio

    Dan, I think you are missing two crucial points in this case.
    1. Rio’s employees have been jailed only after the Chinesesdidn’t get their 45% discount.
    2. Formal evidences for the allegations still have to be produced, at least this is what Rio Tinto says.
    I think this episode is actually consolidating the popular idea that if you don’t bend to the will of the sole party you will face problems in making business in China.
    Law in China isn’t the same for everybody, that’s the message we are getting on the other side of the Great Wall.

  • An

    “The only thing unusual about this case is the decision of the Chinese government to treat the matter not as a commercial trade secrecy violation, but rather, as a theft of state secrets”.
    What could worry is that we now don’t know where the line between state owned and private owned goes? If you in good faith (or not) passed on information that was given to you in what seemed to be a deal between two private companies, and it turns out you did in fact pass on state sensitive infomation, because the state decided to step in and take over your counterparts side of the table?
    What is the definition af state secret in China is it board or narrow? Is there a legal precedence? and is there an autonome lawyer present by your side? all of these things should make you worry guilty or not……
    …. if you violate Chinese law you will be arrested and punished. There is no free pass because you are foreign or because you work for a foreign company.
    Hmm I seriously think this is so basic that it almost not worth saying. I think the problem many have is the feeling that everything is in fact illegal in China, it just not enforced or maybe its just me??

  • outcast

    “1. Rio’s employees have been jailed only after the Chinesesdidn’t get their 45% discount.”
    Whether or not that influenced the decision to arrest isn’t clear, but since the chinese executive of the chinese steel company the Rio guys were talking to also got arrested I doubt that was the sole determining factor.

  • http://chinabizgov.blogspot.com G.E. Anderson

    Your point about following Chinese law is good advice for your potential clients — but what if Rio Tinto WAS following Chinese law? There’s no way to know because the trial will be held in secret.

  • http://bjbarefeet.blogspot.com Hang

    Who says the trial will be held in secret? How do you know it?
    Investigation is ongoing. Chinese executives of some Chinese steel companies who talked to Hu from Rio Tinto were arrested, too. If they break the law, they must be punished by the law regardless of their nationality.
    Let’s wait and see.

  • John

    I’m a little muddy about this, but it seems like the government/police in China are more willing to detain Chinese nationals (including those with double citizenship), versus others.
    There probably are a number of reasons to this, would you mind talking about them a little bit? Thanks.

  • http://chirony.wordpress.com wfrost

    Continuing G.E. Anderson’s point, without transparency or consistency in enforcement or coverage, there is an exceptional competitive advantage for people who know what you can really get away with.
    While minimizing risks may be relatively straightforward — some of the time — is there a cut-and-dry maxim for balancing legal risks with competitive practices? Unless the two are mutually exclusive…

  • tg

    the defn of state secret is an interesting one- in other places once the info is in a co’s hands …and in this case maybe several cos..then it ordinarily would not be a “state secret” anymore
    (yes trade secrets are different)
    ..which then leads to the distinct between SOEs and normal cos…but note some of these SOEs when going abroad and have to apply for investment approvals and other govt clearances in other countries elsewhere etc…often emphasise their “independence”..which goes against any info they holding being a ‘state secret’..

  • t ralph

    Hang,
    You cannot have dual citizenship if you are a Chinese citizen. In the case of Australia many Chinese citizens choose instead to become permanent residents so they do not have to give up their Chinese citizenship. Some, however, choose to become Australian citizen. At the time he was criminally detained Stern Hu was, and continues to be an Australian citizen!
    Steve,
    Did you actually write the passage above or has someone put pressure on you to post it? It did not seem to be your writing.
    I think in part the failure to understand the case was that the Austrlian consulate had to wait a week to visit an Australian citizen and the Australian minister for foreign affairs had to learn about the case through a press interview held with the Chinese foreign minister that was put on the internet. Also if you have such a good case charge the guys with a crime instead of just detaining them.
    This should be a time for China to show how it had risen in the ranks of the international community, rather than taking the old “one step forward, two steps back” approach. Why not show how transparent and fair the Chinese legal system has become?
    As you quite rightly said as the case involves state secrets the court will be closed and the lawyer representing Stern will have to be agreed to by the State Security Bureau. Shouldn’t he in fact of had access to a lawyer after his first interview though … I will be interested to see who his counsel is for the case … anyone heard of Zheng Enchong, Guo Guoting …I am surprised if anyone will want to represent any of the accused.
    The sad thing is though that Stern Hu is being used as a pawn in a game that involves something alot more sinister …

  • ceh

    Enforcement of criminal laws and the severity of punishment for violations does vary for Chinese and foreigners, with the latter usually getting getting off more easily, especially for the more minor offenses. I have some firsthand experience with this. For another account, and for a good primer on life inside Chinese prison, read the book “China High.” Of course, if you’re dealing with heavy duty crimes like rape, murder, theft of state secrets (whatever that means), having a foreign passport won’t help you much (except perhaps if you’re faced with capital punishment, in which case there may be some extenuating diplomatic considerations).
    In the Rio Tinto case, I think there will be some confessions wrung out over the next couple of weeks, followed by a deportation, followed by a period of mumbling and grumbling on both sides before they realize they need to get on with it and do a deal. For the spectators in the international business community, this will get chalked up as another “well, that’s China for ya” shrug of the shoulders, as most people are not involved in multi-billion dollar negotiations in China.

  • http://twofish.wordpress.com/ Twofish

    Chinese state secret laws are extraordinarily vague and broad so basically any information that the government declares is a state secret is.
    The PRC does not recognize dual citizenship. From the point of the PRC government, Stern Hu is as Australian as the Prime Minister.
    Having said that, a lot of this is going to play out in the court of public opinion. Basically if the looks like that the Rio Tinto executives are being tried for something that is relatively innocent and they real reason is political payback, this is going to be very bad.
    However, the leaks to the Chinese press suggest that they are being accused of doing something that they really shouldn’t be doing. If they have videotapes of people handing over bags of cash in exchange for documents marked “GOVERNMENT SECRET. DISTRIBUTION ILLEGAL” then that is a whole other issue.
    Looking at the reaction of the Australians, I suspect that there is something complex going on behind the scenes. If it was obviously just political harassment, I suspect that Australia would have been making a lot more noise than they have been making.

  • Chris

    Dan, an excellent post and one of the best I have seen on the topic. The reaction in the Australian media has been close to hysterical and the comments by readers reveal real and unnecessary fears of China.
    Frankly, if one of my staff, disclosed my bottom line position in a price negotiation with a major supplier I’d be mighty annoyed. If they accepted a secret commission for such information, including full production schedules and everything associated with the demand my company has for the supplier’s product and how much I can pay for it, I would seek criminal legal redress as well.
    The crimes Rio Tinto is accused of are serious violations of the laws of just about every juristiction I understand.
    Rio Tinto and its predecessors, RTZ and CRA, have a pretty poor track record around the world and have been involved in serious disputes with many governments over many years.
    Let’s not imagine every Western company operating in China is compliant. Dan’s reminder to all of us to continue to ensure compliance with Chinese law is timely. It’s not easy or cheap and it’s a tough and tiring regulatory environment. But compliance with the law is the only path to a sustainable and successful business enterprise in China.

  • JT

    Your post assumes away the entire controversy: “Assuming the Rio Tinto guys committed serious crimes, and that they realized they were committing crimes, we’ll assume they will get a fair and just trial and be punished accordingly.” This assumes 1) their guilt 2) that Chinese laws regarding state secrets are clear and transparent such that they would have some way of knowing that they were committing a crime and 3) that the prosecution will also be clear and transparent. I’m not clear what evidence there is for any of the above three propositions. But yes, assuming the truth of all three, an excellent post.

  • http://twofish.wordpress.com/ Twofish

    Under the China-Australia consular agreement, China has three days of detention before it has to notify consular officials of a detention of an Australian citizen, and then it has two more days before they can meet them. The consul can also meet the detained individual once a month as well as send a representative to trial. There is absolutely no legal requirement, and no particular need to notify the Australian government before you notify the press.
    Also, it does appear the Stern Hu has been charged with theft of state secrets. Also what is the “state security bureau”? There is a Ministry of State Security, but they don’t seem to be involved at all in this situation, and they do not have the authority to choose lawyers.
    We shall see what happens, but I find it very difficult to believe that they would arrest an Australian citizen and risk a diplomatic blow-up unless there really was a very strong case. If it was simply “political harassment” they could have just deported the Australian citizen, arrested the Chinese nationals, and no one would have heard about it at all. One possibility is that they specifically arrested an Australian citizen specifically so that they have some credibility that yes, really something nasty did happen.
    Also, there is no reason right now that China has make a show about fairness and transparency. Just go through the regular procedures. If you through a “show” to convince everyone you are being fair and transparent, the fact that you are obviously putting on a show kills your credibility.
    As far as defense lawyers go. You shouldn’t expect every case to turn into an episode of Perry Mason. A lot of the time (in fact most of the time), the defense lawyer looks at a case that is solid, and has to tell the client that there really isn’t that much that can be done. If the government has a strong case, then it really doesn’t matter who the defense attorney is.

  • http://twofish.wordpress.com/ Twofish

    Something that China does to frequently in business situations is to “borrow” the credibility of foreign governments. No one totally trusts the Chinese securities regulators so the government encourages companies to list in NYC and Hong Kong. Similarly the government has outside investors on its bank boards, outside money managers, and outside auditors.
    It occurs to me that the Chinese government may using the Australian government to audit a very extensive anti-corruption probe. If the case against Stern Hu is flimsy, there is absolutely no way that the Australian government could be quiet, because Rudd would get pillored by the opposition.
    As it is, Rudd keeps saying that the case is “complex” which means that at the very least it’s probably not simply political harrassment….
    http://www.abc.net.au/pm/content/2008/s2625784.htm

  • Eion

    Twofish: my understanding is that the State Security Bureau is China’s equivalent of the FBI – a national-level law enforcement agency responsible for going after the most serious criminals. As far as I know the Public Security Bureau don’t go above provincial level. You occasionally see marked State Security Bureau cars on the roads – they look just like police cars, but say 国安 on the side, rather than 公安.

  • Chris

    I doubt very much the case is harrassment. I would think the authorities thought long and hard about any action against a foreign company as large as Rio Tinto. The major reaction and PR campaigns against it would have been forseen.
    For the moment, let things play out and see what evidence is presented as the case goes through legal processes.
    Resources are a rough and tumble business. Rio Tinto has been sued across the world for environment damage in Bouganville PNG and sparked a civil war in the process.
    From reports in the Western and Chinese press Rio has gone very hard on price and contracts in China.
    This is not your average corporate player.
    Again, let’s wait and see what the process delivers in terms of evidence before going into a fit of paranoia and conspiracy theory.

  • J.D

    Just about everything can be a crime under Chinese law. However, the real story is why some “laws” are enforced some of the time, and ignored the rest.
    This has nothing to do with the law. It’s about the selective exercise of coercive power in China.

  • Henry

    Hi Steve, this is my first comment but I am a regular reader and a big fan of this blog.
    I think many people here are giving the Chinese government too much benefit of the doubt.
    First, choosing to make this a state secrets case (and it was undoubtedly a choice) gives Chinese officials the legal cover to seal off the entire investigation behind closed doors – that is the nature and very purpose of the state secrets law. If this was such an open and shut case against Rio Tinto, a simple matter of a criminal action, why not offer evidence or some other modicum of transparency? There is surely a way to do present a fair case without revealing so-called “state secrets”. And making a “show” of transparency hardly “kills your credibility,” that’s nonsense. There are a hundred ways to handle this that didn’t have to court controversy, but the government choose to do it in a way that was bound to ruffle feathers and moreover snub the Australian government (and particularly Rudd). Whether Hu is guilty or not, it is pretty disingenuous to argue that their are no ulterior motives here.
    Second, it seems that the shakeup with the Chinese steel industry is not all that its been made out to be. The following Xinhua article dispels the rumors about Baosteel executives being investigated and is coy about whether other executives are being investigated(zh):
    Also, WSJ is reporting that many major steelmakers are denying they are being investigated:
    http://online.wsj.com/article/SB124767644347046237.html (seventh graf)

  • Richard Gould

    If Rio employees really did break the law and exchange cash or incentives for trade secrets, then they belong in jail for an obvious violation of Chinese criminal law. It’s right there in Articles 219-220. Simple.
    However, as other commenters have pointed out, the issue is the seemingly arbitrary division between commercial and state secrets. There are provisions in the Chinese criminal code outlining punishments for both industrial and political espionage, but nowhere in the criminal code does it say “theft of commercial secrets from an SOE constitutes political espionage.”
    That’s a fairly large gray area, and the Rio Tinto case makes it clear that the PRC will interpret commercial espionage as a political matter when it’s most convenient, or when the case involves an industry that is strongly tied to national economic development (ie: steel, energy, etc.). Where is the line drawn? Is all competitive or market research on an SOE to be considered a political issue if it crosses into certain gray areas? Is a private company in which an SOE owns a 20% stake to be considered politically sensitive?
    A little more transparency might be nice.

  • http://twofish.wordpress.com/ Twofish

    Henry: If this was such an open and shut case against Rio Tinto, a simple matter of a criminal action, why not offer evidence or some other modicum of transparency?
    Because it’s probably not an open and shut case, and you likely have an ongoing investigation.
    Gould: There are provisions in the Chinese criminal code outlining punishments for both industrial and political espionage, but nowhere in the criminal code does it say “theft of commercial secrets from an SOE constitutes political espionage.”
    Which means its quite possible that Stern Hu is being accused of something else. The Australian government either knows more or should know more.
    If Hu paid a government regulator for negotiation information, then it wouldn’t be covered under Article 219, since Article 219 requires that the holder of the information be “severely damaged”. If it is negotiation information then they holder of the business secret hasn’t been damaged yet.
    Gould: That’s a fairly large gray area, and the Rio Tinto case makes it clear that the PRC will interpret commercial espionage as a political matter when it’s most convenient
    I don’t think it’s clear at all that this is the case. We need to know a lot more about what is going on before we can come to that conclusion.
    In the mean time we know two things:
    1) the Australian government knows more than they have been saying
    2) they aren’t screaming bloody murder

  • http://twofish.wordpress.com/ Twofish

    ralph: Why not show how transparent and fair the Chinese legal system has become?
    Ummm… Because it isn’t.
    There is this possibility that someone overreacted and that Stern Hu really didn’t anything particularly nasty, or nothing at all really.
    If it turns out that the Chinese authorities do have good reasons for holding him, then in two or three months, the truth will come out and they won’t look bad.
    If it turns out that they *don’t* have good reasons for holding him, then they are likely to just wrist slap him, quietly deport him, and hope everyone forgets about it in a month, which they probably will.
    If they aren’t sure that they do or don’t have good reasons for holding him, then they’ll be quiet until they know.

  • Phil Hand

    I think this whole piece is a bit of a whitewash. I haven’t seen what the Australian press are saying, so I don’t know what Steve’s reacting to, but I’d make the following points – some of them have already been made by other commenters.
    1) “If your business in China cannot be conducted without resorting to unlawful actions, leave China.”
    For Rio Tinto, the largest mining concern in the world (?), it’s not really an option to leave China, currently representing 1/3 of the world’s ore markets.
    2) “there is a strong temptation for foreign companies to collect data using questionable or openly illegal methods. Bribery of the target company’s accountant or bookkeeper is one of those common techniques.”
    Rather inaccurate account of what’s gone on here. The guys from the Chinese side of the negotiations were not “bookkeepers”, they were top level execs. What was going on between Rio and its counterparts was not espionage, it was normal negotiation (quite possibly including bribes – we don’t know).
    3) In China everything is illegal. Statements that “the Chinese govt wouldn’t do this unless they had a good case” are (a) untrue – they lock people up without evidence/reason all the time, and (b) irrelevant – there’s almost always a good case. You can’t get out of bed in this country without breaking six laws.
    4) There’s no evidence that Rio and Hu were doing anything that they hadn’t been doing for the last N years, and that all the other miners/steel mills in China do. The only difference is that this time the government chose to bash them.
    I think we should be careful not to imagine that the Chinese government has so much unity of purpose. While the foreign ministry probably finds this embarrassing, this investigation is being conducted by the ministry of commerce, pissed off because of the Chinalco deal. I can imagine furious arguments going on behind closed doors right now between departments.

  • http://sydneyphoto.blogspot.com Michael

    “Foreign companies need to understand the fundamental fact that if you violate Chinese law you will be arrested and punished.”
    The problem is that “Chinese law” is an Alice in Wonderland concept. Chinese law means whatever Hu(mpty) Jintao chooses it to mean.
    If Rio Tinto had given China the over-generous discount it was demanding, and had allowed Chinalco to buy into Rio Tinto, do you really think that their executives in China would now be in detention for ‘violating Chinese law’?

  • Wahaha

    Comparing judicial system in China to that in West is like comparing a fifth grade to a Ph.D.
    Law system needs time, a long long to be improved and called “good”.
    JFK’s father made millions cuz the the regulation system on stock market wasnt good at regulating.
    It is common sense that China wont risk a diplomatic mess and an important financial partership without hard evidence.
    BTW, I guess even China provides hard evidence, you will still hear someone using “not open enough” to dismiss the evidence.

  • http://twofish.wordpress.com/ Twofish

    Hand: For Rio Tinto, the largest mining concern in the world (?), it’s not really an option to leave China, currently representing 1/3 of the world’s ore markets.
    Yes it is an option. It’s an option that causes you to lose lots of money, but it is an option. There comes a point at which the Chinese government acts in ways that are so annoying that you just have to pack up your bags and go home.
    Also, if the Chinese government is really playing fast and loose with the law, why do you think that the government won’t just nationalize things. If you really think that there is “no law in China” then it’s stupid to do business there because you won’t make any money in the end.
    Hand: I think we should be careful not to imagine that the Chinese government has so much unity of purpose.
    It doesn’t. That’s a good thing.
    Hand: While the foreign ministry probably finds this embarrassing, this investigation is being conducted by the ministry of commerce, pissed off because of the Chinalco deal. I can imagine furious arguments going on behind closed doors right now between departments.
    I’m sure that’s happening, and a lot depends on what actually happened, but it helps to get the players right. Ministry of Commerce tends to be very pro-trade, and there is no particular reason why it should be annoyed about the Rio Tinto deal. The ministries that would be annoyed would be SASAC, but they aren’t involved in the investigation as far as I know.
    A lot depends on what actually happened.
    Hand: There’s no evidence that Rio and Hu were doing anything that they hadn’t been doing for the last N years, and that all the other miners/steel mills in China do. The only difference is that this time the government chose to bash them.
    That’s also quite true. Unfortunately, “we’ve been paying bribes for the last 15 years” is not much of a legal or moral defense. “Everyone else does it” is also not much of a legal or moral defense. You can try, “I paid the bribe to the wrong person, and it’s not fair that they cracked own on me because I got caught in a power struggle and other people that paid bribes are free.” Hmmmm… Yeah….
    Personally, if the government cracks down on bribery it may be a very good thing. Presumably you are paying bribes because it helps you to make money, and if there is a good likelihood that paying lots of bribes won’t help you in the end, then maybe people will stop doing it.
    The other thing is that paying bribes will make things ***much*** more difficult for a foreign government to help you. If you are a totally innocent victim, then the strategy for a foreign government is pretty easy. Given the Chinese government a month to charge you with something tiny and deport you, and if you aren’t out then you start screaming to the newspapers.
    If it turns out that you’ve been involved in corrupt or embarrassing activities, then what to you expect the foreign government to do? “We *demand* that the Chinese government release X, because he paid bribes to the wrong person!!!! We *demand* that the Chinese government treat all bribe payers equally!!!! We are *shocked* that the Chinese government started actually *enforcing* its laws!!!”
    If you are clean and a citizen of a foreign country, the country can give you some protection. If you are not clean, then they can’t, and the Chinese government can, will (and probably should) take all of that money you were expecting, and leave you with nothing.
    Think about that when you say that you *must* invest in China.
    Michael: The problem is that “Chinese law” is an Alice in Wonderland concept. Chinese law means whatever Hu(mpty) Jintao chooses it to mean.
    That’s absolutely not true. The reason that China has laws is in part to make sure no one person has too much control. If Hu Jintao defined the law, then Wen Jiabao should be scared that Hu will get up and decide that the law is “shoot Wen.” This is what Mao did, and this is why Chinese leaders take the law very seriously.
    Michael: If Rio Tinto had given China the over-generous discount it was demanding, and had allowed Chinalco to buy into Rio Tinto, do you really think that their executives in China would now be in detention for ‘violating Chinese law’?
    I don’t know. But suppose the answer is yes. So what? You really can’t go in, pay bribes, corrupt stuff, break the law, and complain about “selective enforcement.
    I was expecting to make billions with these bribes, but those awful Chinese people, after I paid them illegal bribes, they had to *gall* to take everything away from me…… I demand a legal system that will give me the right to pay bribes…..
    If you are a foreign company looking at this, you might be saying to yourself, well, because of Rio Tinto we absolutely will do nothing corrupt, because even if we get Chinese business, the Chinese will own us and take everything and we won’t make any money in the end.
    So we’ll think twice about going into China until the legal system improves and we won’t have to pay bribes. If we have to pay anything, it will all be over the table and according to law….
    I think that’s a good thing…..

  • JT

    There seems to be strong opinion in Australia that even if Stern Hu is being locked up with no evidence, the government should take things slowly and not make a big fuss. So assuming that the Chinese government has a strong case against Rio Tinto because the Australian government is not publicly screaming bloody murder seems a bit questionable.
    Right now, neither side in this argument has strong evidence, because none has been made public. There are a lot of reasons this looks fishy – the use of the state secrets law, for instance. Some commenters have come up with reasons why, rationally, the PRC government would not want to arrest someone without charges.
    “It is common sense that China won’t risk a diplomatic mess and an important financial partership without hard evidence.” – This is common sense. Alternatively, the government might make a rational decision that it can use fraudulent criminal charges to intimidate Rio Tinto into giving greater discounts on the price of ore, and that neither Rio Tinto or the Australian government will be willing to risk loss of access to the enormous Chinese market/damage to the relationship.
    Right now we don’t have evidence.

  • JT

    This 2007 post from Shanghai Scrap provides interesting background to the current dispute:
    http://shanghaiscrap.com/?p=360

  • Jay

    There are two aspects of this case that point out hazards of doing business in China. One) as you stated, market data is not readily available and there is little transparency. Thus, foreign companies involved in what would be legal competitive intelligence gathering in developed countries find that they are breaking China’s laws. 2) since much of China’s business community is actually state-owned foreign firms find that they are up against the Chinese state when dealing with competitors or business partners. Gathering normal intelligence thus becomes “spying” in the eyes of China Inc.

  • tg

    if there is an allegation of bribery and buying state secrets etc – then isnt the person/organisation who accepted the bribes/released the state secrets also breaking a law- any info on whether there has been detention/arrests at the steel mills?

  • http://www.nytimes.com/2009/07/27/world/asia/27riotinto.html Grant in China

    yep nothing to see here.
    I’ll Just move along (to another blog)
    “Now there is a diplomatic standoff over the fate of Mr. Hu, who friends say always avoided the spotlight, particularly after a photograph of him taking part in demonstrations in T-men Sq. threatened his first job, at a large state-owned company in China.”
    http://www.nytimes.com/2009/07/27/world/asia/27riotinto.html

  • Charles Liu

    tg, other execs have been detained. According to report Shandong Laiwu Steel (山东莱芜钢铁) exec Wang Hongjiu(王洪九) was detained for questioning.

  • Charles Liu

    Another detention mentioned in Chinese media is Beijing Shougang Steel Group exec Tan Yixing.

  • http://www.chinalawblog.com/2009/08/the_rio_tinto_arrests_the_hist.html China Law Blog

    China’s Rio Tinto Arrests. A Rapid Fire Historical Perspective.

    Sometimes big events can be so complicated, controversial and unwieldy, there is hardly any point in reading current reports because they are likely to be so biased and/or inaccurate as to be of no value. In those instances, particularly when the under…

  • Bob

    I might be overly pessimistic concerning corruption in China but….
    There are a few people saying that the evidence against Rio Tinto is factual. But take the Olympics for example, concerning the alleged underage gymnasts. The Olympics committee launched an investigation purely [in my opinion] to appease America. The Chinese government provided passports and birth certificates issued by the CHINESE GOVERNMENT. So when the chinese government [with an axe to grind] produce what they say is “evidence” how can it be trusted? I often wonder how they have any credibility left at all.