On July 5, four employees of Australia's Rio Tinto Group were arrested and taken into state custody by the Chinese Ministry of State Security. The arrests came one month after a proposed $19.5 billion Chinese investment in the company was scrapped.
The deal would have been China's largest such investment, and it could have made them a controlling market actor for natural resources. It would have combined the state-owned Aluminum Corporation of China also know as Chinalco with the Anglo-Australian firm. Rio Tinto instead opted for a deal with BHP Hilton.
According to The New York Times, citing state sources, in the Chinese government, one Australian executive Stern Hu and three Chinese employees are being charged with what amounts to spying and economic espionage. Hu is believed to be the highest ranking Western executive ever accused of spying in China.
Qin Gang, a spokesperson for the Chinese Foreign Ministry, said "The Chinese government has gained strong evidence to prove they were spying and stealing China's state secrets."
Gang maintains that this has nothing to do with Chinese resentment in the fallout of the Chinalco-Rio Tinto deal. Gang also believes that this instance will not harm relations between China and Australia.
In China the law regarding prosecution on grounds of "state secrets" or "national interests" is intentionally vague. This allows the government opportunity to punish, or wield the threat of punishment, to both foreign and domestic political opponents.
The government uses these cases as a show of force and usually comes out with little or no negative repercussions. In this case however, the global ore industry is tuned-in to the scandal.
Obviously, if Mr. Hu and his associates did indeed commit some sort of crime they should be punished for it. However, it seems more likely that the charges are trumped up and the real culprit of injustice is the Chinese government itself.
This story has been getting some coverage in major media, but the underpinnings are not well discussed. If the charges prove to be false, then the arrests become little more than kidnapping and ransom. In essence, the government "shanghaied" employees of a competitor as reprisal for a business deal gone afoul. China has a long-standing reputation of spying in other countries particularly the United States. It also has a long history of institutionalized injustice regarding foreigners and political opponents. The Rio Tinto case is just another notch in an ever extending belt.
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