China accuses Australian Rio Tinto executive of spying
Updated
Australia is locked in high-stakes diplomacy with China, after Beijing accused the mining giant Rio Tinto of spying.
The allegation's been levelled at Rio's head of iron ore operations in China, Stern Hu, who was detained by Chinese authorities in Shanghai last Sunday, along with three Chinese employees of the company. Canberra is still seeking full consular access to the Australian man, but the situation has upped the ante at a time of difficult iron ore price negotiations with China, and after running debate in Australia about Chinese investment proposals.
Presenter: Linda Mottram
Speakers: Stephen Smith, Australia's Foreign minister; Barnaby Joyce, Senator, National Party of Australia; Philip Gray, Morningstar investement advisors.
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MOTTRAM: Rio Tinto has been the focal point of some difficult business between Australia and China, first over the collapsed $US19 billion bid by Chinese state-owned company Chinalco to buy into Rio Tinto, then over China's attempts to push down contract iron ore prices. Overlaying that is Australia's frustration that there's been no progress towards a China-Australia Free Trade Agreement, all amidst an at-times rancorous debate in Australia about just how close the country should get to China. Now, the diplomatic heat is rising, with confirmation that an Australian employee of Rio Tinto was detained last Sunday in Shanghai, along with three Chinese employees of the mining company. And after several days of attempts to find out why, just hours ago, Australia's Foreign Affairs minister Stephen Smith revealed just how serious matters are.
SMITH: Australian officials were advised that the reason for Mr Hu's detention was that he was being detained on suspicion of espionage and stealing state secrets.
MOTTRAM: The detained Australia is Stern Hu, Rio's top iron ore man in China and long-time resident of Shanghai. And while charges are yet to be formally laid by Chinese authorities, Foreign minister Smith was at pains to stress Australia's and Rio Tinto's surprise at the spying allegations.
SMITH: Can I say though the Australian government was very surprised by both the detention and the reason for the detention given by the Chinese authorities and we continue to seek consular access to Mr Hu and continue to seek explanations for the reasons for the detention. I've also seen in the course of the afternoon speculation that somehow Mr Hu's detention may be linked to commercial matters between Rio Tinto and China. I've seen no evidence and I have no basis for any such speculation.
MOTTRAM: Chinese legal experts say if matters are criminal in nature, China's criminal procedure law allows for detentions for questioning without arrest for a week. A complex procedure must then be followed if a formal arrest is to be made. Stephen Smith says Australian officials should, under mutual treaty obligations, be given full access to Mr Hu by week's end. The legal experts also caution that foreign business people do get arrested and jailed in China, with some well-publicised cases notable for involving Chinese-born holders of another passport. They also note that China says that the law is a weapon. Much attention will on the nature of any charges laid against the Rio Tinto staff, in particular whether they do relate to subverting state power or trading in state secrets, as an indicator, te experts say, of whether China's actions are politically motivated. Other sources in Canberra say they are not hopeful of a quick resolution, believing the detentions to be calculated, while the incident has rekindled warnings about the wisdom of getting too close to China. One very loud voice on the issue is National Party Senator, Barnaby Joyce.
JOYCE: What we suspect, what I hope is not the case but I suspect it will be, it'll be closely tied to the Chinalco-Rio deal and this is something that I warned about right from the word go that when you deal with state-owned enterprise you have that cross-over between what is a commercial issue becomes a diplomatic issue and right now we have a major diplomatic issue.
MOTTRAM: Uncertainty around the case has also sent a shudder through the investment sector worldwide. Speculation among traders as far away as London is that China is playing a tit-for-tat game over its inability to secure all the investment deals it wants in Australia, and over the issue of iron ore prices. More generally, Philip Gray of investment advisory firm, Morningstar, says the Rio Tinto case in Shanghai gives cause to restate a general warning.
GRAY: What it does tell us as investors and Australian investors in the emerging market countries like China is that we shouldn't necessarily expect the exact same standards of behaviour or the same practice as we do if we are thinking about or investing in for example the United States or Europe. So that's the same standards of corporate governance, of openness and transparency, of corporate behaviour and so-forth.
MOTTRAM: And perhaps the same degree of political stand-offishness, if you like, by the authorities?
GRAY: Absolutely!
