The Shanghai trial of Rio Tinto executive, Stern Hu, has important lessons for Australia.
Mr Hu, an Australian national born in China, was arrested nine months ago, along with three other Rio Tinto executives who are Chinese citizens. The four men were detained incommunicado for about six months on suspicion of espionage, before charges of bribery and stealing state secrets were laid against them.
Mr Hu was permitted only minimal contact with Australian consular staff, despite repeated attempts by the Australian Government to facilitate this. He was not permitted to be represented by an Australian lawyer, and the trial was conducted largely in secret.
When Rio Tinto executives, Australian officials and journalists attempted to get details of the charges, they were refused on the ground that the charges themselves were “state secrets”.
As if this bizarre sequence of events were not enough, it is clear that the Beijing regime has written the laws, appointed the judges, prosecutors and defence lawyers, and stage-managed the trial.
The outcome was therefore pre-determined, as are trials of Chinese human rights activists, journalists and Falun Gong practitioners whose principled outspokenness in defence of civilised values has been brutally suppressed.
Those who worked alongside Stern Hu speak of him as a man of honesty and integrity, a person well versed in the Chinese legal system, as his parents were thrown into a labour camp for years during the Maoist era’s Cultural Revolution, when he had to live with his grandparents.
In these circumstances, the reports that Mr Hu has pleaded guilty to the charges should be seen not as an admission of guilt, but as a damage-minimisation strategy in what is an elaborate charade, stage-managed by the communist regime, to punish Rio Tinto and perhaps Australia for some real or imagined slight.
There are numerous issues which brought down the ire of Beijing on Rio Tinto, and its Chinese employees are in the most vulnerable position.
One of these was the commercial success of Rio in price negotiations for the supply of iron ore to Chinese steel mills. Shortly before the global financial crisis, Stern Hu negotiated an increase in iron ore prices of almost 90 per cent in iron ore prices.
Another issue was the agreement between Rio and BHP-Billiton, the two largest iron ore producers in Western Australia, to share their production facilities and negotiate jointly with Chinese steel mills.
A third issue was the unsuccessful bid by the Chinese state-owned corporation, Chinalco, for a controlling stake in Rio, which failed in Australia, shortly before Stern Hu and his associates were arrested. Chinalco remains Rio’s largest single shareholder, and is one of Rio’s global business partners.
Another issue was the defection of a Chinese diplomat in Sydney a few years ago, despite Chinese attempts to force him to return to China.
Since the arrests, Rio Tinto executives, including CEO Tom Albanese, have been vigorously working to support the families of their arrested employees, as well as trying to placate the Beijing authorities in an effort to convince them that Rio Tinto is a partner, not a threat.
Within the past few weeks, Rio has announced a joint venture with Chinalco to develop a large iron-ore project in Guinea, and, as the trial took place, Mr Albanese was in Beijing to participate in the China Development Forum, a commitment which kept him in China while the trials took place.
All the signs are that Rio’s efforts will succeed in mitigating the severity of the sentences handed down at the end of the Chinese show-trials. However, the vindictiveness of the prosecution of Rio’s employees shows how brutally Beijing treats those whose actions conflict with the Chinese Communist Party’s global ambitions.
In particular, it highlights the danger of allowing Chinese corporations, which are financial entities controlled by the Chinese Communist Party, from gaining control of strategic industries, as they are threatening to do through takeovers of major corporations in Australia.
Their capacity to take over foreign corporations is largely due to the massive trade surpluses accumulated by Chinese corporations which export to the West. This, in turn, is a result of the Chinese government’s policy of maintaining an artificially under-valued currency, which permits Chinese manufactured goods to flood world markets.
As a relatively small economy, Australia is highly vulnerable to the takeover of its world-class mining industry by Beijing. Additionally, China will inevitably attempt to influence Australia’s foreign policy, away from its Western allies and towards an accommodation with Beijing, as it has attempted in the United States through buying political influence.
As China grows as a global economic power, these attempts will certainly increase. The rise in Australia’s national debt and its government debt – largely funded by foreign capital, particularly from China – puts Australia’s very sovereignty at risk.
Peter Westmore is national president of the National Civic Council.