What Rio Tinto Corruption Scandal Reveals About China

China advances the rule of law, but at what cost?

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Executives in the British-Australian mining company Rio Tinto have been sentenced by Chinese courts to prison sentences as long as 14 years, bringing to close a bribery and espionage scandal that began in July 2009. The businessmen are charged with accepting millions of dollars in bribes from Chinese officials and for illegally obtaining secret information from state-run steel companies. With China embroiled in conflict with Google over censorship, the Rio Tinto case further highlights the complicated intersection in China between business and transparency. Here's what the case says about China and doing business there.

  • Victory for Fairness of Chinese Law  The Asia Times' Wu Zhong writes of the court's decision to decrease the espionage charges from stealing state secrets to stealing commercial secrets, "Contrary to overseas opinion, many analysts in China believe the change in the charge represents progress in China towards an improved rule of law." Wu explains that the court is now considering state-run businesses as businesses, rather than as extensions of the state. This lessens their political protection and levels the market playing field.
  • This Is How Business in China Is Done  The Financial Times' David Pilling points out that relations between China and Rio Tinto remain good. The arrested official, everyone understands, "had little option but to cosy up to Beijing. On the very day the four Rio executives were standing trial in Shanghai, Tom Albanese, Rio's chief executive, was paying homage to China's leaders in Beijing's Great Hall of the People. The symbolism could hardly have been clearer."
  • New Emphasis on Regulation  The New York Times quotes Liu Junhai, a law professor in Beijing: "The Rio Tinto case is sending a signal to the world that China’s model of managing its financial activities has changed ... In the past, we overemphasized the country’s development, but didn’t pay enough attention to regulation."
  • Chinese Courts Still Too Political  The Wall Street Journal's Stanley Lubman says the case "demonstrates the usual limits on the ability of defense lawyers to fully represent their clients, a disturbing lack of transparency, and the impact of political influences on the proceedings and the outcome." The courts are still "a state apparatus that is more concerned with fighting crime than judging from a neutral vantage point." Lubman says the "level of legality" is improving but very slowly, which is raising concerns within both China and the international business community.
  • Chinese Firms Playing Hardball  The U.K. Independent speculates, "there is a belief in some quarters that this is all revenge for Rio Tinto's decision to spurn an offer of Chinese investment last year when the mining giant was in financial difficulties." Just before the 2009 arrests, Rio Tino turned down a $19 billion offer to sell part of the company to Chinese firms. Additionally, "there is a widespread belief that Beijing wants to squeeze foreign technology companies out of lucrative markets to sell computers and office equipment to government departments."
This article is from the archive of our partner The Wire.