China finally arrests Rio Tinto execs
Aug 12th 2009 7:00AM
Updated Dec 3rd 2009 12:58PM
For weeks China has claimed that four Rio Tinto (RTP) executives engaged in espionage to get secrets about Chinese iron ore prices. One wild claim was that the espionage cost the world's most populous nation over $100 billion. Once it became clear that the figure was impossibly high, it was withdrawn.
Now the Chinese have officially arrested the four managers of the British-Australian mining company. A number of media sources report that they have been charged with bribery and stealing state secrets. Of course, there have been suspicions for some time that the move is in retaliation for the failure of a deal between China metals company Chinalco and Rio Tinto. The deal would have given the state-owned Chinalco about a 20 percent interest in Rio. Australian officials, worried that iron ore is a "strategic" asset, did not want the communist country to be in any position to control Rio Tinto decisions.The arrests point to the fact that the new China, the China that is open to free trade and foreign investment, is not so different from the old China. The country is still willing to flex its muscles to get what it wants in world markets and take a measure of revenge when it believes it is due.
Business and economic trouble with China may just be starting. The country has already said it will use part of its $2 trillion in foreign currency reserves to help its large state-owned companies buy more strategic assets abroad. It is obviously the largest lender to the U.S. and probably to a number of other developed countries. China's economic interests are bound to clash with those of other major nations.
The West has tried to dodge a trade and economic war with China. That may no longer be possible.
Douglas A. McIntyre is an editor at 24/7 Wall St.