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Chinese Fourth Estate & the Rio Tinto Episode

Introduction

China’s Shanghai No.1 Intermediate People’s Court sentenced and awarded rigorous jail terms to four employees of Anglo-Australian mining major Rio Tinto Iron Ore on charges of ’receiving bribes and obtaining commercial secrets’. [i] The issue stirred media debates in China. In the post-Olympic era, it was but fifth of such an opportunity after the Green Dam scandal, the Hubei pedicurist murder case, the Xinjiang riots and the Google episode. In the studied opinion of quite a few scholars and media mandarins, the Chinese ‘fourth estate’ this time crossed the rubric of even a mouthpiece of what it has been otherwise characterized for long.[ii] Nevertheless, the discussions quite often gravitated to unsavory ends.

The paper delves into ‘the core issue at stake in the Rio Tinto episode’ while laterally exploring the ramifications of the wrongs at the two ends, if any and in over all perspectives.

Schematically, the paper thus focusses on: Trial and its Flip Flop Sides; Media Factor in Dispensation of Justice; and, the Home Truth. The assumptions of the study included: the four Rio Tinto employees, charged, tried and sentenced jail terms on charges of taking bribes and stealing commercial secrets, worked in an environment where payment of ‘good deed fee’ was an accepted norm for getting long term contract by relatively smaller players. The Rio Tinto trials involved big interests, such as big steel corporations, the Communist party of China (CPC) bigwig and the ‘princeling’ connections, pitted against small players; and, the Rio Tinto trial carries an opaque side story, where inner party succession struggle and not just legal issue held the strings.

This study, thus, stems from three basic concerns: first, as the Rio Tinto episode prima facie relates to miscarriage of much needed business culture, business environment and the rule of the business game, there is need to get to the truth and plug lacunae, as it could be, for the world at large; second, as media projection can manipulate and be manipulated to the detriment of truth, there is a need to know how far the Chinese media then lived up to journalistic ethics and standard; and the last but not the least, not until a correct picture is brought out and pressed hard, the stake holders at two ends in this episode or elsewhere would continue to hold right issues to ransom with impunity, which is inconsistent within the framework of WTO regime.

Trial and its Flip Flop Sides

On March 29, 2010, the Shanghai Number One Intermediate People’s Court convicted four employees of Anglo-Australian miner Rio Tinto PLC on charges of receiving bribes and obtaining commercial secrets.[iii] The Chinese Public Security Bureau officials in Shanghai had detained them on July 5, 2009 on charges of receiving bribes and obtaining commercial secrets. After the prosecutors approved the arrests, on Aug 11, 2009, Xinhua reported:

“Preliminary investigations have showed that the four employees, Stern Hu, Liu Caikui, Ge Minqiang and Wang Yong, had obtained commercial secrets of China’s steel and iron industry through improper means, which had violated the country’s Criminal Law, according to the statement. Prosecution authorities also found evidence to prove that they were involved in commercial bribery. Investigations have also revealed that there were suspects in China’s steel and iron enterprises who were providing commercial secrets for them.”

The trial began on March 22, 2010 and concluded by noon of April 24, 2010. The trial was held in a closed court and no details of the case were made public by the Chinese Fourth Estate until the court announced the verdicts on March 29, 2010. Filing a report on the trial process a day earlier on March 23, 2010, the Wall Street Journal correspondent Michael Sainsbury wrote:

“The Rio executives were driven into Shanghai No 1 Intermediate People’s Court in closed police vans yesterday morning to begin the three-day trial. …The morning session and most of the afternoon were taken up by the prosecution outlining the charges. The defendants then had an opportunity to speak to and address that evidence. … Australian media, other foreign press and most Chinese media outlets have also been barred from all parts of the trial. Only three journalists from the Communist Party’s propaganda machine – the People’s Daily, Xinhua news agency and Shanghai’s afternoon newspaper, Xin Min News – were let in.

Reports in various sections of the press world over including those in Australia suggested that the People’s Republic of China (PRC) had set up a temporary group of its most powerful ministries several months ago to hold regular discussions about the case of the four Rio executives, despite insisting last week that the trial will not be politicised. It is understood that a group of senior officials from the ministries has been meeting regularly to discuss charges against the men and the sentences they may receive.

Five days ahead of the trial on March 18, 2010, People’s Daily quoted a statement of the Chinese Foreign Ministry spokesperson Jiang Yu, made earlier in February 2010, which, interalia, stated: “I believe this case will result in a lawful and just outcome.” Among analysts, the conservatives looked at the statement as being little better than a pious platitude. Long time China watchers were least amused. As a mouth piece of the CPC and hence, the government, the paper had rather preempted criticism about the nature and character of the Chinese judicial expediency.

Just the next day on March 19, 2010, China Daily carried a signed article by Ai Yang. In an obvious reference to a statement of Australian Premier Kevin Rudd, the author warned against ‘deliberate’ politicization of the issue. It quoted Chinese Foreign Ministry spokesman Qin Gang, and suggested that the statements of the kind had oblique potential of ‘disturbing the Chinese judicial system’.

As the trial commenced on March 22, 2010, the Chinese electronic and print media had blared the success of Chinese prosecution and judicial systems in getting the defendants accept their guilt in different words but in the same tone and tenor. They had hammered hard that the Australian national Stern Hu and his three colleagues, say Liu Caikui, Ge Minqiang and Wang Yong had accepted bribes of more than 86 million Yuan (US$ 12.6 million) and stolen commercial secrets.[iv] The court opened with the prosecution dropping the charges of stealing the state secrets almost impromptu while the accused accepted instantly their misdemeanors in taking money from the Chinese steel mills who wanted to ensure allocation of iron ore. Reporting from Shanghai for the Wall Street Journal a day later James T. Areddy looked at the development as ‘surprising’.[v] In his subsequent dispatches, James T. Areddy characterized court proceeding as being a ‘harsh spotlight on China’s criminal justice’.

The Australian consul, Tom Connor, who witnessed proceedings through the morning of March 22, 2010, had said that he wouldn’t be permitted into the court during the parts of the trial that deal with allegations that Mr. Hu and his colleagues obtained commercial secrets, which were to start later in the day and expected to conclude by noon on March 24, 2010.Jerome A. Cohen, a professor of law at New York University and an expert on the Chinese legal system, criticized the court for holding largely closed proceedings and for conducting a trial that appeared to favour the prosecution and deny the defendants due process. In Chinese courts, according to Jerome A. Cohen, “you’ve got to look beyond the appearance of things.”

James T. Areddy held that the accused had no option but to accept charges as ‘legal strategy’. Research manager at Dui Hua Foundation in Hong Kong Joshua Rosenzweig, who monitors the justice systems, is on record saying : “Pleading guilty is generally looked on favorably and is a mitigating factor in sentencing.”

Media Factor in Dispensation of Justice

Political scientist Walter Lippman is quite often quoted for his remark: “The news and truth is not the same thing”. George Orwell is as well quoted to have once ominously pronounced: “During times of universal deceit, telling the truth is revolutionary”. He could have perhaps said little different about justice. Beyond skepticism as such, the role of media in dispensation of truth and upholding justice can not be sidelined. While the problem is almost wide spread, it is perilously tantalizing in the system where it is a mouth piece of the ruling elite of the party and the government such as China.

While stereotyped for most part, the Chinese media seemed to have set foot on a new terrain of discussions and debate. Interestingly, it has been more diverse as well piquant in the regional print and electronic media than the main stream outfits. Interestingly, the overseas news papers and magazines have been more articulate than the native ones. Nonetheless, the media debates did not seem to render enlightened opinions. Fixated for most part on economic and foreign relation issues, Chinese media got legal issues to discuss on for a change. Most reports, in this context, went on to regurgitate government statements that there was “concrete evidence” and that a “comprehensive legal procedure” has been gone through in the judicial probe of each and every charge.

On the debate about the legality of the arrests of Rio Tinto employees, in particular the Australian citizen Stern Hu, the overseas Chinese news paper Qiao Bao ( The China Press) remained on the forefront in the defence of the Chinese government.[vi] While acknowledging that the event took place soon after the botched Chinalco deal, it sought to call the West a hypocrite. It quoted the case of the US arresting an engineer of Chinese descent on account of stealing commercial secrets. Qiao Bao imputed motives. It argued that the issue was handiwork of Australian political parties who made mountain of the mole hill with an eye on elections next year.

Among the national dailies, the Chinese language Nanfangbushi Bao (Southern Metropolis Daily) and English Language China Daily (Zhongguo Ribao) fall in the category of Qiao Bao with a difference in taking up the cause in tune with the Chinese official line. The two sought to present evidence to the charges. In both cases, the story line drew sustenance from heresy. Nanfangbushi Bao quoted sources saying that the computers seized from Shanghai Office of Rio Tinto ‘showed existence of confidential government data’. China Daily, similarly, quoted an anonymous “industry insider” to suggest that Rio had bribed managers at all 16 of China’s largest steel companies.

Xinhua website carried a vast quantity of articles from different journals. While there is criticism of Rio Tinto and the suspects, there is also a great deal of introspection about the problems of China’s legal system and the structural inadequacies of the steel import sector. Yangcheng Wanbao (Yangcheng Evening News), for example, carried an article by Zhu Sibei, where the thrust of discussion lay on what could be “secret” and what could be “public”. He argued the imperatives of reforming the Law on Guarding State Secrets. He saw China’s problem in being totalitarian (quanneg zhuyi zhengfu) Shijie Shangye Baodao (World Business Report) had come out with a long list of suggestions for how to reform commercial espionage laws. It argues that China should reference the United States’ Spy Act of 1996, which sets out specific statutes that facilitate good behavior among foreign governments and organizations operating there. It wanted China to promulgate a Law against Commercial Bribery to counteract the leakage of information by domestic companies. It called for legislations to prevent officials in ministries with foreign activities to do “moonlighting” for foreign companies. On the institutional side, it wanted the Chinese central government to set up an Economic Security Monitoring Bureau to monitor investment and M&A activity in sectors vital to national security.

In the electronic media, Phoenix Info News TV has been quite inquisitive in its approach. Zhang Jie, a financial columnist, stressed the need for “just and transparent legal procedure in order to achieve international credibility.[vii] He bemoaned that the Chinese legal system had suffered credibility gap in the face of some of the high profile judicial personage having been involved in corruption cases. While supporting government actions, Zhang evinced some sort of awareness of the technical problems at hand. Quite simultaneously, CCTV presenter Bai Yansong suggested that China could learn a thing or two from Japanese companies, where there are strict rules and procedures to prevent employees from divulging sensitive information, and those who are found guilty have a difficult time ever finding a job again.

Interestingly, Guoji Jinchu Bao (International Finance News) asserted that the leaks, as it was alleged in the case of Rio Tinto, do take place “in day-to-day relations with foreign firms, especially when Chinese companies employ foreign investment banks and accountancy firms for consulting services”. Getting to the crux of the matter, Guoji Jinchu Bao offered various reasons as to why the price negotiations turned sour and Rio Tinto episode got wings. It argued that the government’s excessive influence on the China Iron and Steel Association — the official price negotiator — led price negotiations to take on the air of a government mission, thus leaving little flexibility for negotiation. It also points to the lack of unity among steel importers: although the Association has repeatedly asked mills not to buy from Rio or other producers during negotiations, they have done so anyway. Guoji Jinchu Bao quoted Commerce industry spokesman Yao Jian telling that China lagged behind Japan, the EU, and the United States, where industry associations negotiate very effectively.

In the Chinese print media, there were then hardliners, who incited chauvinist sentiments. They seemed to target the Australian political leadership, in particular the Australian Prime Minister Kevin Rudd. Liu Yang, the co-author of Unhappy China – The Great Time, Grand Vision and Our Challenges, Xiao De of Guoji Xianqudao Bao (International Herald Leader) and a lot many whipped public sentiment against Australia in a bid to defend Chinese government action. Xiao De cited the results of an online survey conducted by Sina.com, where 73.1% of those surveyed think Rudd is “not the way they once imagined him to be”.

Notwithstanding, Cankao Xiaoxi (News Scan), the prime source for Chinese translations of Western news articles, has not hesitated to republish articles from Australian and US newspapers that then opposed the Chinese government: opinion pieces taken from Reuters and Newsweek, for instance, argue that China’s unjust legal system places foreign companies at risk in strategic sectors and allows the government to interfere in commerce whenever it pleases. Guoji Shibao (Global Times) carried an excerpt of a lecture of Li Yonghui, professor for foreign relations at Beijing Foreign Studies University, who sought to put the case within a broader paradigm of shifts taking place in China’s relationship in the world.

Home Truth

Rio Tinto episode got the centre stage both by default and design. Australian citizen Stern Hu and his three Chinese colleagues were arrested and tried for using bribery” as a means to “obtain sensitive data from China’s steel producers”, the crime that tantamounts to commercial espionage under the vague statutes of the Law on Guarding State Secrets. Various Western media, most notably The Economist, have speculated that the arrests were a political act of retaliation after conflicts between China and Rio Tinto, where the latter had refused to sell 18% of its shares to China Aluminum Corp. The Economist had contended that the PRC stance constituted part of a series of legal actions that were then initiated by the Chinese government against foreign companies, including a Citigroup subsidiary in Shenzhen and property developers in Tianjin.[viii]

Rio Tinto and the Australian government as such have not been averse to the trials for the wrong doings, if any. They were concerned about the elements of transparency, in particular as the Chinese authorities ignored a 1999 consular agreement that gave Australian diplomatic staff access to court proceedings. Chinese officials said the agreement had been overridden by a domestic law and said there was no right of appeal for Australian diplomatic representatives.

In his article, “More than bribery: Wealth, power and Rio Tinto”, Peter Lee has speculated on the possibility of an infighting in the top political corridor in Beijing involving Du Shuanghang, China’s second-richest billionaire and a man who made his fortune with the direct political support of Hu Yishi, a relative of Hu Jintao. He owned the increasingly powerful and profitable Rizhao Steel, which posed a direct threat to the steel industry’s established plutocrats.[ix] Rio Tinto trials were thus an exercise in shadow boxing with ulterior motives.

(The writer, Dr. Sheonandan Pandey, is an eminent China analyst based in New Delhi.Email: sheonandan@hotmail.com)

End Notes and References:

[i] Court ruling sentenced Stern Hu, an Australian national, born in 1956, jail term of 10 years along with confiscation of assets and a fine of 1 million Yuan (146,413 U.S. dollars) on the charges of bribery and stealing commercial secrets. Three Chinese nationals Wang Yong, Ge Minqiang, and Liu Caikui, working with the company, were sentenced respectively jail terms of 14, 8 and 7. Besides confiscation of assets, the three were fined respectively 5.2 million, 800,000 Yuan (117,302 US dollars) and 700,000 Yuan (102,639 US dollars). [ii] The term ‘mouthpiece’ (喉舌) for the Chinese media has been historically right since the Yan ‘an days. The paper Jiefang Junbao then openly said: “We comrades who work at the newspaper are just one part of the Party organization. We must all, as one a body united, act according to the Party’s will. Each word and line, each character and sentence, must take the Party into consideration”. Speaking in a seminar on November 28, 1989, the then Chinese President Jiang Zemin said: “Our country’s newspapers, broadcast and television are all the mouthpieces of the Party, the government and the people. This should be sufficient to explain the character of [Chinese] journalism and its important place in the work of the Party and the nation”. Subsequently, in an address on October 7, 1998, the then Chinese Premier Zhu Rongji offered the epigraph: “Supervisor of public opinion (舆论监督), mouthpiece of the masses, mirror of government, pioneer of reform.” [iii] The four Rio Tinto employees included Australian citizen Stern Hu (Chinese: Hu Shitai). The other three such as Liu Caikui, Wang Yong and Ge Mingqiang were Chinese nationals. [iv] http://bbs.chinadaily.com.cn/viewthread.php?gid=2&bid=663627 [v] James T. Areddy, “Four Admit Guilt as Rio Tinto Trial Opens”, The Wall Street Journal, 23 March 2010. http://online.wsj.com/article/SB10001424052748704117304575136901789094786.htm [vi] Qiao Bao (侨报) is a Chinese language daily, published from New York. Ever since Aug 1990, it has found increasing number of institutional and individual subscribers in China. [vii] Phoenix Info News TV, Chinese, 0730 hrs (IST), Mar 25, 2010; http://www. danwei.org/ media/Chinese_media_on_the_rio-tinto. Php. [viii] http://www.economist.com/ businessfinance/dispalyStory.cfm? story_id=14031440 [ix] http://www.wsws.org/ articles/ 2010/apr2010/ster-a 13.shtml

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