Negotiations - Chinese way (Spy Charges)

[trev]

Negotiations between Rio Tinto and Chinese authorities on this years price for Iron Ore have stalled,, with China insisting on a bigger drop in price than Rio will offer.
So the Chinese spy agency has arrested Rio General Manager of Chinese operation, a person of Chinese ethnicity, but Australian citizen and accused him and 3 other employees of spying. They claim to have abundant evidence to prove the charges although as yet they have been imprisoned only not charged.
There is bad blood between China and Rio Tinto due to the collapse of a deal where a Chinese government owned company was going to take a large shareholding in Rio Tinto for 20 billion dollars or so.
So China has now arrested all Rio top employees in China and claims it will charge them with spying. The evidence seems to be that they had access to some confidential data on Chinese steel mills. Apparently gaining this information is against China's national interest and worthy of spying charges which can result in the death penalty.
this can be seen as a warning to major companies, "do not play too hardball in negotiations with China".

[Dinner]

Yeah, because most gold mining companies with multimillion dollar gold claims on the line are engaged in espionage.

The paranoia is beyond stupid. I'm reminded of a guy from my town, San Diego, who worked for Qualcomm and who got arrested for espionage in Russia. His crime was he was working to construct the cell phone network the Russian government hired Qualcomm to build. A local Russian engineer who was pissed off that a foreign expert who actually had experience with the equipment got hired instead of him turned in his name to the FSB. That's right, the guy got arrested for working on a cellphone tower the Russian government hired him to work on. Stupid.

[DaShi]

This is indeed stupid paranoia, because they are sending the message of "If you don't play our way, we'll ****ing kill you!" to the rest of the world, whether intentional or not. It smacks in the face of their claims of a peaceful rise to power. Plus, they aren't making any friends with the West or Islam in Xinjiang these days. :facepalm:

[Dinner]

Qualcomm's world headquarters is about five miles from my house and loads of people in my neighborhood work there. That Russian case got boat loads of media attention at the time just like this Rio Tinto case is getting now. It's just unbelievable the amount of paranoid insecurity some countries have.

[trev]

There are 3 major iron ore suppliers in the world today, BHP-Billiton, Rio Tinto from Australia and Vale from Brazil. In recent years they together have tried to match supply to demand in a way that keeps prices higher. China is angry at this tactic, which they have pursued more successfully than OPEC has with oil. The arrest for spying is seen by some industry observers as China's revenge on these companies and a warning to be more reasonable in negotiations. Rio Tinto's executives were chosen as the target because of the collapse of the Chinalco/Rio Tinto tieup which China wanted.
But the arrests are a warning to all commodity exporters to China not to negotiate too toughly with China, because they can and will get their revenge this way.

[DanS]

This stuff is not surprising to me. Once you negotiate prices on a national basis, the business automatically becomes an affair of state, with all that attaches to it, like espionage and political interference.

[Theben]

Companies do engage in spying all the time. But normally on other corporations.

If China doesn't want foreign investment then it can keep shooting itself in the foot.

[DaShi]

And I don't care what A.O. Scott says. "Duplicity" was crap. The plot couldn't have been more obvious with Admiral Ackbar in every scene. But watching Paul Giamatti brawl with that other corporate guy at the beginning was pretty cool.

[trev]

Latest 'information' coming out of China is that the Chinese President personally authorized the investigations by the spy agencies of China that resulted in the arrest of the General Manager of Rio Tinto. it is probable that the investigations extend beyond Rio Tinto to all major suppliers of raw commodities into China. It appears that China has decided that it is in their economic interest to have commodity companies that comply more easily with Chinese economic interests.
So the General Manager of Rio Tinto can expect a lengthy period of time in Chinese gaols and other major world companies supplying China with huge volumes of raw materials need to think about how hard they push their negotiations with China.

[dannubis]

Guess where next years price negotiations won't happen...

Besides BHP and Rio are teaming up in Australia. It will suck to be a Chinese steelmaker in the next few years I can tell you.

[classical_hero]

Well if that is the wy China are going to play, then they are playing a game that will only hurt them, since the companies have all the supply and they have the demand, so they can just halt supply until China gives the companies what they want. China is trying to play strong, but it is playing stupid, since they will get burnt from this.

[trev]

What sucks a lot here in Australia is the way the Aussie government is afraid to tread on the toes of China hard and is just going through the motions in regard to questioning China on the reasons for the arrest of the Ausralian citizen. This is such a serious matter of an Australian being told he will have to face unreasonable and trumped up spying charges that the government here should be stamping it feet much harder on the Chinese toes, and seeking support from other governments to do the same.
But it is a high risk game China is playing, companies will be limiting what staff they base in China in the future to avoid valuable staff being imprisoned in their gaols.

[DaShi]

Guess where next years price negotiations won't happen...

Besides BHP and Rio are teaming up in Australia. It will suck to be a Chinese steelmaker in the next few years I can tell you.

China is pissed because it made some stupid iron purchases last year (and this one too) and now wants a discount. With commodity prices rising, they began asking for a price far too low. You can hardly blame Rio Tata for that. The irony is, when foreigners try to negotiate in China, they always have to pay more. Yet when China negotiates with foreigners it outright demands a lower price or it takes its ball and beans the other guy with it. Poor play on their part.

[DaShi]

Well if that is the wy China are going to play, then they are playing a game that will only hurt them, since the companies have all the supply and they have the demand, so they can just halt supply until China gives the companies what they want. China is trying to play strong, but it is playing stupid, since they will get burnt from this.

The way I see it is this. China is a new player at the big boy table of international trade. All the other nations were rather happy to have China join because China was new and potentially exploitable. China, for the most part, has played defensively, as it should. However, now it has broken one of the major rules of the big boy table.

At the kids table of international trade, this type of hostage taking is a regular and accepted occurance. The brutal response, just as accepted. The rules there are hard and fast. They all know it and act accordingly. Trading disputes are solved with violence. The big boys felt they didn't need or want to play like that anymore, at least amongst themselves. This is the stuff that wars are made of, afterall. So they created their own table with its own more "civilized" rules. Mind you, it is just as cut throat as before, but now it is done through currency manipulation, tariffs, and the WTO. However, the big boys are still free to use the old tactics against the kids. There may be some grumbles from the others, but as long as it doesn't occur on their table, there remains stability and the game goes on.

Now China has come and made a kids play against another big boy and threatens the whole system. The rest of the big boys will start wondering if China really belongs at their table. Some might give the new kid some slack and just give them a penalty for a few turns, others might want China kicked back to the kids table, and others will ignore it to avoid further problems. All just want things to return to normal: exploit the kids, while trying to out manipulate eachother.

[DanS]

Now that there's no contract, on what basis is Rio Tinto supplying Chinese steel producers?