Hu case spotlights risks of business in China By Sandra O'Malley AAP August 14, 2009 03:09pm
LIKE any commercial decision, doing business in China involves weighing up the costs against the benefits.
The financial rewards can be significant. On the downside, there are the difficulties of operating in a different culture, in a foreign language and the complex and opaque nature of commerce under China's communist regime.
Over the past five weeks, the risky side of that equation has undoubtedly become a little less appealing to some business people. If nothing else, the case of Australian Stern Hu, an iron ore executive with mining giant Rio Tinto, has given many reason to pause for thought.
Apprehended with three Chinese colleagues on July 5, it has taken more than five weeks for Beijing to elaborate on what alleged transgressions they have committed in the course of annual iron ore negotiations.
This week they were officially arrested on suspicion of commercial bribery and stealing commercial secrets.
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John Long of Sydney While still serious, the new allegations are much less onerous than original claims of stealing state secrets - punishable by death in China. From early defiant insistence there was evidence of these allegations, Beijing is now much more quiet. Why the charges have been apparently downgraded remains a mystery.
Lack of information has been one of the biggest problems facing Canberra and Rio Tinto (rio.ASX:Quote,News) as they deal with a situation that has the potential to seriously harm business relations.
Rio Tinto, one of the world's biggest miners and a major supplier of iron ore to China, is standing by its workers.
Sam Walsh, Rio Tinto's iron ore chief, maintains it's a normal commercial situation and his workers have done nothing wrong.
"The charges have been downgraded and I think that reflects what I've been saying all along that we don't in fact believe that there's any evidence of wrongdoing,'' he told reporters in Canberra.
"We work very closely with our people and obviously our management team interface with Stern and our employees but everything from what we understand this is a normal commercial market situation.''
It's a point Canberra's made time and again - there are obviously differences between how China and democratic western nations view the commercial market.
One of the problems for both business and governments in dealing with China is that many of its major enterprises are owned by the state.
It was one of the major concerns about China's state-owned company Chinalco's failed grab for a bigger share of Rio Tinto. Some had suspected this unsuccessful attempt had put Beijing offside and played some part in the detention of Mr Hu and his colleagues.
Others speculated the case had evolved from China's increasing annoyance over the prices it's been paying for iron ore, angry it hasn't been able to cut a better deal during the global economic downturn.
Whether there's a hint of truth to the speculation, or even if it's just perception, it certainly has the potential to do some damage to China's reputation as a trading nation. Beijing denies the case is doing any damage to its relationship with Australia, or deterring investment from other parts of the world.
But there's no doubt other countries have been taking notice.
