Hu Cares?

19 July 2009

The detention for a fortnight now - without charge - of Rio Tinto executive Stern Hu is another reminder that the Chinese government is not a government but a regime. Such antics by the Chinese government are nothing new, though the timing is a severe slap in the face to Australia.

Stern's detention has occurred in the wake of the fall through of the Rio - Chinalco deal, along with the Chinese government not achieving the 40% price reduction on last years iron ore prices that it had pushed for. The Chinese government is seriously angered over these deals falling through, along with the merger of BHPBilliton and Rio Tinto's Pilbara Iron Ore operations.

Stern Hu's detention and even more importantly the Chinese government's refusal to provide details of the detention to the Australian government shows what the Chinese really think of Australia. We need to be realists when doing business with the Chinese, we are dealing with a regime who want our resources so badly that they are considered a key to national security. This is why Hu is in jail. Hu is stuck in an internal battle between the communist party (who will go to any length to lower the price of iron ore) and the Steel mills who are prepared to pay a reasonable price and conduct their business relatively above board.

It is difficult to know the implications of this incident for Australia and its resources industry. It should at least be a definite reminder to not forget our true (or at least truer) friends, particularly Japan and South Korea in the rush to do business with the Chinese. China has made its anger clear and shown the clout they have over Australia as they decide on resources projects they plan to invest in.

Whilst there are fantastic opportunities available for Australia with China's economic growth, the Australian government and big business needs to improve the conditions through which it is conducted.