Wandering China

An East/West pulse of China's fourth rise from down under.

Mining fears of Chinese invasion [The Age]

This problem is not new. On one hand the knee jerk reaction might be – this feels like a relic of the White Australia policy redux decades after its final dismantling in 1973.

But look at it another way. Perhaps China simply hasn’t figured out how to arrive on one’s shores without looking like it’s going to plant a flag and declare permanent settlement with the narrative of communism and collectivism ringing loud in receiving countries.

From antiquity to now, this is what is continuing to do – populating (assimilating?) places with its own culture, people and way of doing business. The ubiquity of Chinatowns is one case in point. Of course a relic of that was the perceived Yellow peril of the 19th century.

Economic xenophobia or as Australian foreign minister Bob Carr puts it… ‘dangerously dumb‘ rhetoric coming from Australia’s opposition leader Tony Abbott? Yes, Australia has reason to be particularly sensitive because of some close calls in the last few years. That said, perhaps this is the point the Australian opposition is missing out on at the moment – that despite its socio-economic capitalist intents, it remains structurally at the core, all about central power. Technically, everything belongs to the state. So it is a matter of ascertaining and hedging and leveraging against just how much of the state’s interests are in play.

In a global village where its participants share economic and resource interdependence across time/space, black and white lines views of Chinese SOEs need updating.

Simply – is there another way to do big business with China outside of their SOE arms? Yes, but hardly. Though just about half of non-agricultural GDP is owned and controlled by the state, 92/116 of Sino-Australian deals in the past six years were with SOEs. By 2010, SOEs held 2.66 trillion yuan in assets outside mainland China, a 50 per cent jump from the previous year.

Perhaps most pragmatically,

”Australia was built on foreign capital; now foreign capital is just coming from a different time zone than in the past … [but] the concept is exactly the same.”  ANZ Bank chief executive Mike Smit

To see how Australia process these cases of state owned investments/foreign investments, check out FIRB, the Foreign Investment Review Board

For more check out An Analysis of State‐owned Enterprises and State Capitalism in China (U.S.-China Economic and Security Review Commission, 2011)

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Mining fears of Chinese invasion.
By Philip Wen
Source – The Age, published August 25, 2012

‘They’re trying to preserve China’s growth, not conquer Australia.’ Photo: Reuters

TONY Abbott was at his pugilistic best as he worked through a tight schedule of meetings on his visit to Beijing last month.

Shaking hands with Chinese dignitaries with the iron-grip confidence of a man who believes he should be the next prime minister, his eyes bulged and veins popped with the adrenalin of meeting senior officials who will set the course of arguably Australia’s most important trade and diplomatic relationship.

His Chinese counterparts were well briefed on our opinion polls; a more senior than usual line-up of party officials and ministers were summoned to have an audience with the opposition leader. When it came to his keynote speech at the Grand Hyatt in Beijing, Abbott had already raised eyebrows by noting that for all of China’s recent economic strides, its people ”still can’t choose their government”. Read the rest of this entry »

Filed under: Australia, Beijing Consensus, Charm Offensive, Chinese Model, Collectivism, Culture, Domestic Growth, Economics, Environment, Finance, Government & Policy, Influence, International Relations, Mapping Feelings, Nationalism, Peaceful Development, Politics, Public Diplomacy, Resources, Soft Power, Stern Hu - Rio Tinto, The Age, The Chinese Identity, The construction of Chinese and Non-Chinese identities, , , , , ,

Australia blasts China over sentence [The Age]

I believe this shows that when it comes to critical issues related to supporting China’s infrastructural growth, they are not quite ready to play the harmonious rhethoric – to them this is a matter of survival. In terms of international relations, whether what Hu did was/is criminal or not is not in focus here. China is dealing with this unilaterally, it is not quite the harmonious cooperative tone they have been charming the world with for a while now.

The PR backlash however, has already started in Australia.”They don’t realise this. The image is now they are the tough guys who do not have to be nice to anyone…’‘ Professor of Chinese studies at the University of Technology, David Kelly.

See also the massive amount of reportage within just one day from The Age in Australia – Australia blasts China over sentence (The Age, 30 March 2010) and Farce flags Canberra’s limited influence in Beijing and also, my favourite (written in true Aussie-style)- Hu just roadkill on the economic superhighway.

– – –

Australia blasts China over sentence
Source – The Age, published March 30, 2010

FOREIGN Minister Stephen Smith has hit out at China over a 10-year jail term handed to Australian businessman Stern Hu, describing it as ”on any measure a very tough sentence” and saying it put at risk the confidence needed by the global business community to operate in China.

Hu and three Chinese colleagues employed in China by mining giant Rio Tinto received sentences of between seven and 14 years after being convicted in a Shanghai court of accepting millions of dollars in bribes and stealing commercial secrets.

Judge Liu Xin broadly accepted the prosecutor’s allegations, including that the men had inflicted huge losses on China by obtaining industry secrets.

The secrets had included information taken from the China Iron & Steel Association, and a steel mill’s production plans. ”The four have seriously damaged the interests of Chinese steel enterprises,” the judge said.

One of the convicted, Wang Yong, would appeal against the verdict ”as not in accordance with the facts” while the other three were undecided, their lawyers said last night.

While the bribery convictions appeared well substantiated, the convictions and the court’s tough rhetoric could add to diplomatic tensions and exacerbate concerns that China’s business and political environment is becoming more difficult and unpredictable.

Mr Smith said yesterday’s verdict left ”serious unanswered questions” because Australian officials had ”very regrettably” been locked out of that part of the trial dealing with theft of commercial secrets, for which Hu was sentenced to five years.

The minister said openness and transparency would have helped Australia and the international business community to understand and deal with the matter.

”Regrettably, China and the Shanghai court chose to go down a different road,” Mr Smith said. ”That leaves serious, unanswered questions and a significant lost opportunity so far as China is concerned.”

However, he conceded that there was ”substantial” evidence that Hu was guilty of bribery, based on what Australian officials had learnt through access to that part of the trial.

Rio Tinto iron ore chief Sam Walsh also accepted that the court had ”showed beyond doubt that the four convicted employees had accepted bribes” and last night formally sacked all four for ”deplorable behaviour”.

The four Rio Tinto iron ore salesmen were originally investigated and arrested for stealing state secrets of such importance that they threatened China’s national economic security, before the case was downgraded to receiving bribes and stealing commercial secrets.

Judge Liu said the actions of the men had caused 1.018 billion yuan ($A165 million) in losses to Chinese steel companies.

He said the stolen secrets included information taken from two conferences several years ago hosted by the China Iron & Steel Association, as well as the production plans of steel mill Shougang.

The industry association provided evidence that those conferences were closed, although industry observers say they may have been open to journalists and foreign traders.

The court said information was generally gathered by Hu or channeled to him by Hu’s three colleagues, and then passed on to Rio Tinto headquarters.

Judge Liu said Tan Yixin, head of iron ore buying at the state-owned Shougang, met with the China Iron & Steel Association on June 8, 2009 – one month before the arrests – and then passed information to Hu that evening at the China World centre, where Rio Tinto has its Beijing headquarters.

He said Hu emailed the information to his superiors at Rio Tinto, who emailed back requesting confirmation.

The judge said Hu received a 6.5 million yuan ($A1.05 million) bribe from Hebei Jinye and $US790,000 from Tangshan Guofeng – both small privately owned mills in north China.

Hu was sentenced to seven years’ jail for bribery and five years for stealing secrets commercial secrets. The total sentence was reduced from 12 to 10 years because Hu showed contrition and repaid the bribes received.

Wang Yong was sentenced to 14 years, reduced from 16, including for accepting a US$9 million bribe from billionaire steel magnate Du Shuanghua, which Wang had argued in court had been a loan which he had repaid.

Ge Minqiang received an 8-year sentence, reduced from 9.5, while Liu Caikui was sentenced to 7 years, cut from 9.

All four are expected to serve their sentences in Shanghai’s Qingpu prison.

Hu is one of the most senior foreign executives to have been convicted in China and questions remain as to the motives behind the investigation. Some sources in China say the conduct of the case has been complicated by bureaucratic and political infighting.

Apart from Wang’s case, the bribe payers were all said to be small and medium-sized private steel mills that were seeking access to high-quality Australian ore on long term contracts rather than paying higher prices for variable product on the domestic spot market.

The convictions will force Rio Tinto to confront criticism that governance of its China operations was not up to standard. The Age understands that after the July 5 arrests the company moved key marketing executives from Shanghai to Singapore.

Mr Smith denied that the government had not pushed hard enough on Hu’s behalf. He said multiple representations were made in Beijing, Shanghai and Canberra for China to honour its 1999 consular agreement with Australia and allow officials to attend the full trial.

”I feel very much for Stern Hu and his family. While we do not condone bribery in any way I think the sentence … was harsh,” he said.

Professor of Chinese studies at the University of Technology, David Kelly, said the trial had left the Chinese legal system’s image in tatters.”They don’t realise this. The image is now they are the tough guys who do not have to be nice to anyone,” he said.

Ann Kent of the Australian National University College of Law said the sentence ”will send a chill down the back of most foreign businesses in China”.


Filed under: Australia, Influence, International Relations, Nationalism, Resources, Stern Hu - Rio Tinto, The Age

Stern sentenced to 10 years by Chinese court [The Age]

The verdict is out – 10 years jail for Stern Hu. More than anything, this sends a strong signal out to the rest of the world – Come to China to do business on Chinese terms. I will be very interested to see how China will manage the PR backlash.

The decision “to exclude the Australian consuls violated existing Chinese law, which since 1995 has explicitly instructed China’s courts to permit foreign consular representation even at non-public trials…” New York University professor Jerome Cohen, US expert on Chinese legal issues.

– – –

Stern sentenced to 10 years by Chinese court
Source – The Age, published 29 March 2010

Stern Hu. Photo - The Age

Australian Stern Hu has been sentenced to 10 years’ jail by a Chinese court for stealing commercial secrets and receiving bribes.

His three Rio Tinto colleagues will face between seven and 14 years for the same charges.

The sentences were at the higher end of expectations and will add to fears that China’s business and political environment is becoming increasingly unpredictable.

The case against Hu has strained relations between Australia and China, with the three-day hearing taking place last week in a closed court and Australian consular officials barred from hearing some evidence.

Australian officials were allowed into the court for today’s verdict, while journalists were able to watch on a video screen in an adjoining room.

Hu, the head of the Anglo-Australian miner’s Shanghai office, and the three Chinese men – Wang Yong, Liu Caikui and Ge Minqiang – had pleaded guilty to taking $US13 million ($A14.33 million), and one admitted to commercial espionage.

The men have been in custody for more than eight months.

The four Rio employees were arrested last July during contentious iron-ore contract talks between top mining companies and the steel industry in China, the world’s largest consumer of the raw material. The talks collapsed.

Australian Prime Minister Kevin Rudd said the world would be watching the trial, which has been widely seen as a test of the rule of law in China and has sparked concerns about doing business in the world’s third-largest economy.

Three decades after China opened up to the world, US and European businesses are now complaining of increasingly onerous rules, preferential treatment for local firms and growing nationalism.

A prosecutor had recommended that Hu be given a lenient sentence after he apologised to the court and to Rio, saying he took more than $US900,000 ($A994,475) to help childhood friends in need, his lawyer Jin Chunqing said.

At the three-day trial of the Rio employees, the court heard evidence that millions of yuan in bribes had been stuffed into bags and boxes for the accused, according to state media.

Hu took money from small private steel companies, which before the global financial crisis were locked out of buying iron ore from Rio because the mining giant prioritised large state-run steel companies, Jin said.

When the global economic crisis hit in September 2008, demand for iron ore plummeted and the smaller players paid bribes “to squeeze into the club and join the buyers,” he said.

Wang strongly objected to the bribery allegations, saying he simply borrowed the money from one of China’s richest men, Du Shuanghua, the National Business Daily said.

Du, the former head of Shandong-based Rizhao Iron & Steel group, has contradicted Wang’s account, saying he paid the Rio employee $US9 million ($A9.94 million) for preferential treatment, the newspaper said.

Australian Foreign Minister Stephen Smith chastised China last week for locking the country’s diplomats out of the courtroom during the hearings on the commercial espionage allegations.

China appeared to have broken its own laws by excluding Australia’s consular staff from the hearings, according to New York University professor Jerome Cohen, a leading US expert on Chinese legal issues.

The decision “to exclude the Australian consuls violated existing Chinese law, which since 1995 has explicitly instructed China’s courts to permit foreign consular representation even at non-public trials,” Cohen wrote in an article co-authored with Yu-Jie Chen, a fellow at the US Asia Law Institute.

Hu’s lawyer Jin Chunqing told The Associated Press by telephone that an appeal had not yet been decided.

“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,” Jin said.


Filed under: Australia, Influence, International Relations, Resources, Stern Hu - Rio Tinto, The Age

China clears Australia, miner [The Age]

Finally, some closure to the resource saga between China and Australia. The scary part – is how fast China is going to learn from this experience. Just check out all the learning issues they’ve managed to glean.

– – –

China clears Australia, miner
Source – The Age, March 15, 2010

A CHINESE government post-mortem into the collapse of the $US19.5 billion ($A21.3 billion) Chinalco-Rio Tinto investment deal has exonerated the Australian Government and the Anglo-Australian miner.

Instead, it accepts the prevailing view in Australia that ordinary economic forces killed what would have been China’s biggest foreign investment deal.

”Objectively speaking, the failure of the merger between Chinalco and Rio Tinto lies in the rapid recovery of the world resources market, including the related stockmarket, which was beyond everyone’s expectations,” says the lengthy report to the State Council, or China’s cabinet, seen by The Age.

The report says the deal’s failure provides an opportunity for ”introspection” and has exposed China’s lack of experience, talent and political acuity in investing the country’s enormous savings abroad.

Its clear-eyed conclusions undermine arguments that the arrest of Rio Tinto’s Stern Hu and three colleagues was an act of revenge against Australia or the company following the collapse of the complex Chinalco deal last June 5. Stern Hu remains in custody in Shanghai, with his lawyer and consular officials having limited access.

However, some observers say top Chinese leaders who supported the Chinalco deal were undermined by its collapse, leaving them less willing or able to intervene to block the arrests.

The State Council document reveals a capacity to accept and learn from the Chinalco failure, which may lead to more politically sophisticated deals.

The 10-member State Council includes the most senior members of the government, as distinct from the Communist Party standing committee.

The document does not list the Rudd government or its Foreign Investment Review Board among Chinalco’s many problems.

It accepts that ”all nations cannot avoid rebellious emotions of the public when they acquire overseas resources”. But it also says the broad Australian backlash to the deal was bigger than expected, and that was largely because of the behind-the-scenes effectiveness of Rio’s chief rival.

”BHP Billiton took full advantage of its skilful mass media propaganda and its lobbying capacity to arouse public emotions and influence the judgements of government policy-makers,” it says.

It claims BHP ”seized the point that Chinalco had a state-owned background”. It then lists Chinese mistakes that contributed to losing the Australian public relations war:

■The near-simultaneous timing of Minmetal’s bid for Oz Minerals and Valin Steel’s investment in FMG.

■Chinalco’s deliberate strategy of keeping a low profile ”lost opportunities for positive publicity”.

■Chinalco regarded Rio Tinto’s shareholders as unified and ”thus lacked sufficient communications with each important shareholder”.

■Chinalco lacked experience in engaging its own lobbyists.

■Chinalco wanted too much too fast by combining a large equity investment with separate joint ventures in individual assets.

The State Council document does not mention what many believe was another key perception problem: Chinalco chief Xiao Yaqing’s promotion to State Council deputy director-general at the time of the announcement of his Rio Tinto deal. The investment deal was signed in February 2009 and collapsed in June, when Rio announced a joint venture of iron ore operations with BHP Billiton.

The State Council document cautions against apportioning blame. It says Rio Tinto informed Chinalco of its parallel negotiations with BHP Billiton, and that the council accepts that as Rio’s financial situation improved, and in the absence of a global anti-monopoly legal regime, Rio had ”more strategic interests” in merging its iron ore operations with BHP than ”vertically” merging with Chinalco. ”One important reason for blocking the vertical merger is conflict of interest, that is, when the major customer of Rio Tinto enters the board of directors, it will have certain rights to speak on product pricing which may harm the interests of Rio Tinto’s other shareholders,” it says.

Filed under: Australia, Environment, Influence, International Relations, Resources, Stern Hu - Rio Tinto

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