China set to weather Rio Tinto jail storm

Four executives sentenced in Shanghai, but international concerns over length of prison terms are unlikely to rattle country's economy.

BEIJING // Global fallout from the decision to hand lengthy jail sentences to four Rio Tinto executives is unlikely to derail China's economy, analysts said yesterday. Following a trial that was closely watched internationally, the Australian Rio Tinto executive Stern Hu was given a 10-year jail term by a court in Shanghai for bribery and stealing commercial secrets.

His Chinese colleagues at the Anglo-Australian mining company were also ordered to serve long prison terms, with Wang Yong sentenced to 14 years, Ge Mingqiang eight years and Liu Caikui seven years. The four were also given fines totalling hundreds of thousands of yuan and will have millions of yuan in assets confiscated. The lead judge at the trial said China's interests had been damaged and its steel-making industry had suffered "severe" losses from the case.

The four, all sacked by Rio Tinto yesterday for their "deplorable" behaviour, admitted accepting bribes, but took issue with the amounts they had been accused of receiving. Hu was said to have taken about 6 million yuan (Dh3.2m), Liu 3.7m yuan, Ge 6.9m yuan and Wang 70m yuan. They had been in custody since their arrest last summer, shortly after Rio Tinto rejected a US$19.5 billion (Dh71.6bn) proposed investment by the state-owned Aluminum Corporation of China (Chinalco), based in Beijing.

Stephen Smith, Australia's foreign minister, described Hu's sentence for bribery as "very harsh" and said there were "serious unanswered questions" over the conviction for stealing commercial secrets, since that part of the trial was held in secret. Jin Chunqing, Hu's lawyer, said it had not been decided whether his client would appeal. "We haven't decided yet if we would appeal to the higher court or what we should do for the next step, as we need to meet and discuss with Stern face to face, and as soon as possible," he said.

Although the sentences follow the decision last week by the internet giant Google to close its Chinese mainland search engine, analysts have cautioned against suggestions they are part of a trend that will make overseas companies more cautious about operating in China. Ren Xianfang, a China economic analyst at IHS Global Insight in Beijing, said the main fallout from the case came last year when the four accused were arrested. Since then, Rio Tinto had been making efforts to improve relations with the Chinese authorities, she said. Only last week, the Rio Tinto chief executive Tom Albanese said in Beijing his company needed a "positive relationship" with China.

"I think there will be some impact, but I don't think an immediate impact on the opening of businesses or operations [in China]," said Ms Ren. "[Companies] will be more careful in terms of their own practices in China, but in terms of strategy and direction, it's quite clear foreign businesses are still quite keen to invest in China." Ms Ren said the case had been the subject of some "media hype" but in terms of foreign direct investment its impact would be modest.

The charges centred on talks last year between Rio Tinto and Chinese steel makers, with the steel mills having rejected the mining companies' offer of a 33 per cent cut in prices. Reports have said Wang received millions of dollars from a steel magnate unhappy at state-managed pricing arrangements who wanted to strike his own deals with foreign ore suppliers. Chinese steel mills often try to secure shipments from suppliers at preferential prices, and this case could indicate Beijing is targeting companies that try to bypass the annual price negotiations.

* with Associated Press [e-mail]