In Chinese court, Rio Tinto mining executive admits taking bribes

BEIJING — In a case that has become a flash point for the foreign business climate in China, an Australian mining executive admitted Monday to taking bribes while working as a chief iron-ore negotiator in China.

Australian Stern Hu and three Chinese employees of the British-Australian mining giant Rio Tinto Group have been held since July, accused of stealing commercial secrets and accepting millions of dollars in bribes.

Hu and two of his Chinese colleagues made their admissions in a Shanghai court, and each faces up to 20 years in prison, said Zhai Jian, a lawyer for one of the Chinese defendants.

Spokesmen for Rio Tinto did not respond to requests for comment.

China has drawn
strong rebukes from the Australian government, which said it is
concerned that Hu will not receive a fair hearing. Australian officials
have been denied access to the commercial-secrets portion of the trial.

The four Rio Tinto employees were detained shortly after the Australian government rejected a $19.5 billion bid by Chinese state-owned metals company Chinalco to increase its stake in Rio Tinto.

Chinese news reports in February said they “sought
and accepted huge amounts of bribes from many Chinese steel companies”
and “obtained commercial secrets from Chinese steel companies through
methods including inducement.”

Rio Tinto Chief Executive Tom Albanese told the Sydney Morning Herald: “This issue is obviously of great concern to us.”

The case has set off fears about the treatment of foreign companies in China at a time when the business environment for non-Chinese firms is perceived to be increasingly difficult.

In perhaps the highest-profile example, Google Inc. said it would no longer operate its search engine in China if it had to continue censoring results. Reporters staked out Google’s Beijing offices Monday expecting the company to announce its departure from China.

Analysts said Google was scrutinized more heavily by regulators than domestic rival and market leader Baidu Inc. Much of the rising discontent among multinationals is centered on government polices seen as favoring home-grown competitors.

Those policies include a bid to reserve lucrative
government procurement contracts for companies that have Chinese
intellectual property or trademarks. That directive, which has not been
implemented, is part of a plan to promote “indigenous innovation” among
domestic companies.

A survey released Monday by the American Chamber of Commerce in China
said the percentage of American businesses that believe foreign
companies are increasingly unwelcome in the Chinese market rose to 38
percent from 23 percent two years ago.

Of those companies that felt unwelcome, most cited
an uneven judicial system, the “indigenous innovation” policies and
so-called “domestic standards” that, for example, force international
computer makers to adhere to Chinese wireless Internet technology and
require cell phone manufacturers to build devices compatible with the
Chinese third-generation, or 3G, signal.

“We strongly support Chinese innovation,” said Michael Barbalas, the chamber’s president. “However, limiting market participants and reducing competition does not encourage innovation.”

The view that business is souring is not uniform.
Another group, the U.S.-China Business Council, believes disputes
between the Chinese government and foreign companies do not add up to a
change in climate. They worry the perception could lead to an
unwarranted response from Washington, where anger is already brewing over China’s currency.

“Our membership is telling us clearly that the China market is important to their sales growth, overall company health” and American jobs, wrote the council’s president John Frisbie.
“Indeed, there are problems, but executives tell us these issues need
to be addressed specifically and with solutions, not with sanctions
that would disrupt the bilateral relationship.”

Chinese Premier Wen Jiabao made good on a promise earlier this month to improve dialogue with foreign business officials.

Wen held a question-and-answer session Monday in the
Great Hall of the People that was attended by leading business figures,
such as Albanese, Stephen Roach, chairman of investment banker Morgan Stanley Asia, and Maurice Greenberg, former head of insurer American International Group Inc.

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