Detention of Rio employee could hurt China business

Australian officials said China has not given them any evidence to support its detention of an Australian mining executive on spying charges. The officials warned the affair could discourage foreign companies from doing business there.

Foreign Minister Stephen Smith told reporters in western Australia that officials will seek information today on the detention of Rio Tinto employee Stern Hu. Hu was detained with three of Rio Tinto's Chinese employees in Shanghai on July 5.

Beijing hasn't provided evidence to support its allegations that Hu spied for Rio Tinto – the world's third-largest mining company – to gain an edge in iron ore price talks with Chinese steel mills, said Smith.

"We may well be in for a long haul here," he said. "Which is why we are urging the Chinese authorities – and officials will take this up in Canberra and Beijing – that this matter be dealt with expeditiously." Smith warned Hu's detention may discourage foreign companies from doing business in China.

"China needs to think very carefully what implications, if any, this has for the international business community and the international network's view of China," said Smith.

Financial Services Minister Chris Bowen told Network Ten television in Australia: "The Chinese Government is very aware that it is not good for business certainty if there's a regular pattern of foreign businesspeople being incarcerated."

The Rio employees were detained as the company negotiated on behalf of global iron ore producers in price talks with Chinese steel mills.

Hu manages Rio's Chinese iron ore business. The other detainees are Chinese.

The Rio employees are accused of bribing Chinese steel company personnel to obtain summaries of the Chinese negotiators' meetings and gain an edge in price talks, according to Chinese news reports.

The maximum penalty for an espionage conviction is life in prison.

Australian diplomats visited Hu on Friday, and Smith said he appeared to be well and raised no health or welfare concerns.

But Australian officials have to wait another month to visit Hu again, said Smith.

On Saturday, Australian trade minister Simon Crean met with Chinese officials during a trade mission in Shanghai and said his government was "deeply concerned" about Hu.

China, the world's biggest steel producer, has criticised iron ore suppliers for repeated price rises and is pressing for reductions. The other major suppliers are Australia's BHP Billiton and Brazil's Vale SA.

Information on Chinese steel company ore costs, profit margins and technology spending all are considered official secrets, according to news reports.

The accusations reflect the communist government's sensitivity about fields such as steel and energy that it deems strategic as well as its intense secrecy about a wide array

of economic and industrial information.

Rio expressed surprise at the spying allegations and said it is "committed to high standards and business integrity". It said Chinese authorities have not given the company any details about the case.

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