China's Iron Ore industry demons

Stern Hu could be expelled from China

The Sohu news portal has a headline news story analyzing the case against Australian national Stern Hu, one of four members of the Shanghai office of Rio Tinto Australia who were recently arrested in Shanghai under suspicion of stealing Chinese state secrets, and asserts that there is a high likelihood that Stern Hu will be expelled from the country.

According to the news story, which was originally published by China Economic Net (”中国经济网”), the “state secrets’ that Stern Hu is believed to have illegally obtained were the “bottom lines” of state-owned Chinese steel companies for iron ore price negotiations.

“The effect of the Rio Tinto case on domestic members of the steel industry is gradually deepening.”

“According to reports, China is currently re-examining iron-ore import licenses, and will possibly cancel the qualifications of around 20 companies, of whom the majority are trading companies. An inside source says that the China Iron and Steel Association (CISA) and the Ministry of Commerce are currently investigating whether import companies have engaged in speculative purchasing.”

“With regard to this information, although the journalist has not yet obtained confirmation from CISA, a figure close to CISA has informed the journalist that because of the Rio Tinto case, CISA is indeed currently examining the 112 companies that are permitted to import iron ore, yet the number of import permit cancellations will be determined on the basis of the results of the on-going investigation into Rio Tinto. Reports of a total of 20 companies are not at all accurate.”

“It is believed that starting in 2009 CISA began to reduce the number of companies that qualified for iron ore imports. Public information indicates that in 2005, China had over 500 companies that were qualified to import iron ore, of which over half were trading companies. As of August last year, the number of these companies had fallen to 112, of which approximately 40 were trading companies.”

“With regard to this contract, however, one industry expert who is unwilling to reveal his name said that the number of core companies that are members of CISA is 72, all of which are state-owned producers. Of these, 16 are large-scale steel companies. CISA, which is a semi-official organization, has always represented the interests of these companies. This major contraction is definitely directed at trading companies.”

“Rooting out ‘demons’ in the industry”

“Since the Shanghai National Security Bureau and the Ministry of Foreign Affairs confirmed that Stern Hu had ‘engaged in espionage and theft of Chinese state secrets, and caused major damage to Chinese national economic security and interests’, dispute over whether or not Stern Hu is actually a spy has been incessant.”

“Examining the information revealed by multiple media outlets at present, Stern Hu and other individuals not only obtained a large amount of detailed information concerning the purchasing plans, raw material inventories, production arrangements and sales information of steel companies, they even used all methods at their disposal to purchase confidential information, including the bottom line for iron ore negotiation prices.”

“An experienced member of the legal profession said to the journalist that ‘whether or not the ‘bottom line’ in iron ore negotiations can be considered a state secret is not clearly stipulated by current legal documents.’ However, given the reactions of the National Security Bureau and the Ministry of Foreign Affairs, these ‘bottom lines’ are already considered to be state secrets.”

“A steel-industry expert who is unwilling to reveal his full name said to the journalist that ‘CISA represents the state in negotiations with Rio Tinto, and the results of these negotiations not only affect the interests of the entire steel industry, but also affect the automobile and home appliance industries, which depend upon the steel industry.’ Stealing the bottom line of CISA in price negotiations is thus equivalent to stealing confidential economic information of the state that relates to all industries which employ steel, and could even influence the momentum of the entire national economy.”

Title of original news story in Chinese: “胡士泰涉两宗罪待审,可能被判刑附加驱逐出境”

Link to original news story.