Australian Executive Held on Spy Charge in China

China has detained an Australian executive of the
world's third-largest mining company on suspicion of espionage amid
the company's tough negotiations with China on iron ore prices,
authorities confirmed Wednesday.

Chinese officials confirmed the arrest of Stern Hu, the
Shanghai-based general manager of Rio Tinto's Chinese iron ore
business, said Australian Foreign Minister Stephen Smith. He added
that he was "very surprised" to learn of the arrest.

Smith said he had seen no evidence the arrests were linked to
commercial matters between the Anglo-Australian miner and China.

"Australian officials were advised that the reason for Mr. Hu's
detention was that he was being detained on suspicion of espionage
and stealing state secrets," Smith told reporters in the western
city of Perth.

Rio Tinto is acting as lead negotiator for global iron ore
suppliers in price talks with Chinese mills. But the two sides
failed to reach an agreement by the June 30 expiration of previous
buying contracts. Rio represented suppliers including Australia's
BHP Billiton Ltd., Brazil's Vale SA, and Japanese and Korean mills.

Hu was one of four Rio Tinto workers detained in recent days,
though the exact timing of the detentions wasn't clear. The Sydney
Morning Herald newspaper identified the other three as Chinese
nationals who were also members of Rio's iron ore sales team. The
company declined to identify any of the workers.

Smith only said the other three were not Australian citizens.

China's vague laws on industrial espionage and other spying give
authorities wide latitude in deciding what to prosecute. The
government treats a sweeping array of economic and other data as
state secrets.

Rio Tinto has been unable to contact the detained employees,
said Ian Head, a company spokesman in Melbourne. Australian
diplomats in Shanghai were urgently seeking access to Hu, Smith
said.

"Rio Tinto intends to cooperate fully with any investigation
the Chinese authorities may wish to undertake and has sought
clarification on what has occurred," the company said in a
statement. "Rio Tinto is concerned about the employees' well-being
and is doing everything possible to help them and support their
families."

A spokesman for the Shanghai police, who would give only his
surname, Liang, told The Associated Press that he had no
information on the case.

China criticized Rio Tinto and the Australian government last
month after the company abandoned a deal to have state-controlled
Aluminum Corp. of China, or Chinalco, invest $19.5 billion in Rio
Tinto.

Rio Tinto, which is traded on stock exchanges in London and
Sydney, launched a rights issue to raise money instead. Chinalco
took up a portion of the $15.2 billion share issue to maintain its
9 percent stake in the company.

The Chinese steel industry group also has criticized Rio Tinto's
plan to form a joint venture with Billiton, combining their mining
assets in western Australia. The group said the tie-up might reduce
competition, raise prices and hurt customers.

China's Commerce Ministry said the breakup of the Rio
Tinto-Chinalco deal would not harm Beijing's ties with Australia.
But a ministry spokesman warned that the deal with Billiton might
face an anti-monopoly investigation by Chinese authorities.

Australia's foreign minister said he had seen speculation that
Hu's detention could be linked to commercial matters between Rio
Tinto and China but added that, "I have no basis for any such
speculation."

Sen. Barnaby Joyce, a right-leaning opposition lawmaker who
campaigned against the Rio Tinto-Chinalco deal, said its failure
"would appear to have inspired" the arrest of the Rio Tinto
workers.

"This should be a clear example to Australia, and other
countries around the world, of the extent of the relationship
between a 100 percent (state) owned entity ... and the actions of
the Chinese Government," he said in a statement.

In 2002, a Chinese-born American, Fong Fuming, was convicted of
paying bribes to help investors obtain secret information to bid on
power projects. Fong was sentenced to five years in prison but
expelled from China in 2003 after three years in captivity.

Many of those charged with spying in China have been
businesspeople from rival Taiwan who are accused of working for the
island's government.

In 2001, a group of Chinese-born academics and others with links
to the United States were prosecuted on charges of spying for
Taiwan. Most were expelled from China after being convicted and
sentenced.


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