Rio Arrests, China’s ‘Gray Areas’ Unsettle Business Community

The international business community is increasingly nervous about the ‘gray areas’ of doing business in China.

An employee sits at the reception desk of the offices of Australian mining giant Rio Tinto in Shanghai on August 12, 2009. Rio has been at the center of a political storm with the recent arrests. Philippe Lopez/AFP/Getty Images

Rio Tinto executive and Australian citizen, Stern Hu, has been officially charged with a lesser offence by Chinese authorities but it will not ease the minds of the international business community who are increasingly nervous about the ‘gray areas’ of doing business in China.

Stern Hu and three colleagues Liu Caikui, Ge Minqiang, and Wang Yong have been accused of using “improper means to obtain commercial secrets” about China’s steel businesses, said state run media Xinhua.

The four were detained on July 5 and have been held in a Shanghai detention center following accusations of bribery and espionage, the latter charge bringing a life sentence in China.

The lesser charges come as a relief to Rio, whose iron ore executive, Sam Walsh, said, “The charges have been downgraded and I think that reflects what we’ve been saying all along that we don’t in fact believe that there’s any evidence of wrongdoing. We believe that we have a code of conduct and that our employees have followed that.”

The downgrade of the accusations made by the Chinese authorities however does not reassure the international business community about what is acceptable or not in commercial dealings with China.

Reinterpretation of the Rules

Chris Nailer, a specialist in international business at Australia National University (ANU) says, Mr. Hu’s arrest represents a reinterpretation of the rules, something that goes with the territory in China and can work in favour of a foreign business—or against depending on the individual business and the prevailing economic conditions.