Beijing, China, 15 July 2009. China is extending its investigation into the Rio Tinto crackdown to other mining firms. Tensions rise as the nation attempts to tighten its grip on corruption and social unrest during these times of economic chaos.
Ten days ago, four employees of mining giant Rio Tinto were detained on allegations of industrial espionage, stealing state secrets, and upsetting the country's security and economic position.
Specifically, Stern Hu, the firm's Australian general manager for iron ore in China, has been found to have confidential information about many of China's steel mills.
These data include details on the mills' sales, production schedules, raw material supplies, outputs, purchasing plans, and more. Chinese authorities are saying this is industrial espionage.
These allegations follow prior Sino-Australian friction earlier this year. To begin with, there have been difficult iron ore negotiations that have been ongoing. Then the Chianlco-Rio deal, which was valued at nearly $20 billion, fell through.
Before that, Rio claimed that Chinese mills broke terms of their contracts by canceling iron ore shipments as a means to control prices.
The larger picture is simply a climate of economic turbulence amid a corrupt business environment and a desperate drive to control and direct the economy from the government.
Aggressive government action has been taken against corrupt Chinese officials as part of this push to bring power back to President Hu. The goal is to align economic interests of firms with the government for the sake of the nation.
Social upheaval has also sprung from economic troubles, and this is one area China must keep tight control over. Its human rights and social reputation is far from acceptable by the west.
So this Rio Tinto case is meant to set an example to others, both within and outside the iron ore industry. According to a New York Times report, the iron ore industry in China is fraught with corruption.
"There's a huge underground arbitrage market in China," said Ren Qiang, the general manager of Zibo Antai Import and Export Company, which trades iron ore.
Bjorn Borgisky, EconomyWatch.com