The arrest by the Shanghai State Security Bureau of Stern Hu, the head of iron-ore operations in China for the Australian mining giant Rio Tinto, has shocked the business world and thrown the government of Prime Minister Kevin Rudd into a diplomatic crisis.
The arrests have cast a shadow over Australia-China ties, which have been key to Australia avoiding a recession in 2009.
Anglo-Australian miner Rio was in intense price negotiations with China when Australian Stern Hu and the three others were detained in Shanghai, accused of stealing state secrets and bribing Chinese steelmakers for information.
International security analyst Clive Williams said every country, not only Australia, now faced difficulties dealing with China, because of the country’s looming economic problems and leadership sensitivities about them.
“It’s a difficult time to be dealing with China, because in a state-owned economy there is a certain amount of blow-back from economic stagnancy to the leadership,” Williams, from the Strategic and Defence Studies Centre.
Rudd’s image as a China expert has been dented by recent political wrangling over a failed $19.5 billion investment by Chinese metals firm Chinalco in Anglo-Australian miner Rio Tinto, and now the arrest of Chinese-Australian Stern Hu, Rio’s top iron ore salesman in China.
The Sydney Morning Herald newspaper said the investigations appeared to be part of a realignment of how China managed its economy in the wake of the global financial crisis, with spy and security agencies promoted to top strategy-making bodies.
Last week, Chinese authorities detained Anglo-Australian miner Rio Tinto’s top iron ore salesman in China, Australian Stern Hu, and three of his Chinese subordinates, on suspicion of stealing state secrets.
Hu Jintao, the Chinese president, reportedly called for the investigation personally which led to the arrest of 4 managers from the Australian mining giant Rio Tinto, with accusations of industrial espionage, reported the Sydney Morning Herald. The paper quoted government sources in Beijing.