Why Rudd must secure Stern Hu’s release: Kohler

The big losers out of the Stern Hu affair, apart from Stern Hu himself and his three colleagues, must surely be the Chinese business classes – especially those running internationally-focused state-owned firms.

It is clear that the outrageous and bizarre incarceration of Hu and the other Rio Tinto employees, without charges or representation, was made at the very top level of the Chinese Government, and that it was entirely political.

If Hu at least is not released very soon, with apologies, then not only will Australia’s political relationship with China be in deep trouble, and suddenly a big problem for Kevin Rudd rather than a key strength, but so will China’s business relationships with the rest of the world.

But a “sorry” does not seem very likely. Fairfax’s John Garnaut reports this morning that the arrest is part of a major realignment of how China manages its economy, and that the spy and security agencies have been promoted to top strategic positions.

Specifically, according to Garnaut, the Ministry for State Security has been put in charge of economic dealings.

Thus, the imprisonment of Stern Hu can be seen as a message from the Ministry of State Security, the Chinese Communist Party and President Hu Jintao himself, to all Chinese business people and those looking to deal with them, that they are now in charge.

Whatever spurious justifications the Chinese might put forward for the arrest of Stern Hu, it is a total disaster for Chinese entrepreneurs and the leaders of state-owned businesses – people such as Zhou Zhongsu of Minmetals, who has just bought most of the assets of Australia’s OZ Minerals and employed Andrew Michelmore to run the business.

Zhou, Michelmore, and all of the people with whom they will be dealing as marketers of zinc and nickel, have been reminded Hu Jintao’s boss, and that he and his Communist Party cronies have a very different idea of how business should be conducted to that held by most of the rest of the world.

So far Chinese investors have not seen the sinister implications of the Rio arrests: the Shanghai share index went up 1.5% on the day the arrests became public, adding to a 70% boom in the Shanghai market this year (versus no change by the world index).

But the effect on Chinese businesses of this clampdown by the state security apparatus will surely be profound and unpredictable.

Business people everywhere in the world are now scrambling to find out what a Chinese “state secret” is, before they ask any further questions of business partners.

The state news agency, Xinhua, says that state secrets refer to: “classified information concerning major policies and decisions of state affairs, national defense and activities of the armed forces, diplomatic activities, national economic and social development, science and technology, activities to safeguard state security and the investigation of crimes, and other items that are classified as state secrets by the state secret protection departments”.

Xinhua also reports that whereas the US produces about 100,000 classified documents a year, China generates millions.

In other words “state secret” means anything that someone in authority wants it to mean.

Meanwhile, the Australian Government must not sacrifice Stern Hu in the name of good relations with China.

Kevin Rudd and the foreign minister Stephen Smith must stop pussyfooting around and act vigorously at the top level of the Chinese Government to secure his release. To do otherwise would be to accept any foreign government’s right to imprison an Australian citizen without charge or representation.

This article first appeared in Business Spectator.