Philip Bowring: China Gets Tougher

In the wake of the sentencing of Rio Tinto executives in China, Philip Bowring looks at the bigger picture of the iron ore business in the country:

Whatever the full truth of the charges against them (Hu pleaded guilty to a corruption charge but not to charges involving commercial secrets), corruption in the iron-ore business in China was known to be rife due to an import licensing system which favored a few major steel producers and created a two-tier price structure.

The ore trade in China may be cleaned up, following a change in the pricing system announced March 30, but foreigners in other businesses are left worrying.

In addition to the threat of criminal action for commercial ends, there is concern that the businesses may become caught up in Chinese political infighting, in which corruption accusations are a common weapon. Hitherto, senior personnel of big foreign companies have been largely exempt from criminal charges.

Many see the Rio case as a sign of increased self-confidence in China; a feeling that foreign capital is less needed now. That Hu was born in China and had emigrated to Australia may have added an element of personal retribution.

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