China detains Rio executive on suspicion of espionage

Rio Tinto was one of those companies which levered up just as the economy was turning down, rushing its bottom line ad forcing it into the hands of Chinalco, a large Chinese commodities company.  However, as commodity prices have turned up and investors have simultaneously started buying shares, Rio was able to escape the Chinalco deal ad link up with rival BHP Billiton.

The Chinese are naturally sour, despite earning a nice deal breakup fee.  The question is whether their displeasure has taken a dangerous turn.  At the weekend, four Rio executives in China were detained.  Now, one is being held on suspicion of spying.

An Australian Rio Tinto employee has been detained by Chinese state authorities on suspicion of espionage and stealing state secrets, Stephen Smith, Australian foreign minister, said on Wednesday.

Stern Hu, an Australian citizen who is working as a marketing executive with the miner and currently living in Shanghai, is one of four Rio employees detained by Chinese authorities since Sunday.

Mr Smith ruled out any commercial link between the surprise detention of Mr Hu and his three colleagues and any commercial matters concerning Rio’s, bitter rejection of a $19.5bn deal with the Chinese state-owned minerals giant Chinalco last month.

They would say that, wouldn’t they.  The sequence of events should make one sceptical about why Mr. Hu is being detained.  Until this matter is adequately explained, we should all be vey nervous about what it portends regarding future Chinese retaliation for protectionist measures.

Apropos protectionism, the German government has now confirmed an official bid for automaker Opel by a Chinese car company, Beijing Automotive Industries (BAIC). As the Chinese have become noted of late for being the high bidder, I suspect BAIC has put in a good offer. (Update 920ET: The Telegraph puts this offer at €660 million for all of GM Europe including Vauxhall) To be sure, the Austrian-Canadian auto parts maker Magna is on the verge of finalising its bid.  Nevertheless, the Germans are going to need to treat the Chinese bid with diplomatic aplomb.  We have already seen enough protectionism against Chinese companies.  Another slight of this nature would be proof positive that Chinese money is considered no good for buying top-tier western companies.


Rio executive held by China on suspicion of spying – FT

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