The New York Times

August 12, 2009
Op-Ed Contributor

Beijing's Rio Tinto Washout


HONG KONG — Hell hath no fury like China scorned. The recent attacks on the British-Australian mining giant Rio Tinto are ugly. They tell not of a China engaging with global commerce in a manner befitting the size of its trade and financial assets. They tell of a China whose recent success has gone to its head, inspiring an officially sanctioned xenophobia that lauds every Chinese achievement with jingoistic fervor, and blames every Chinese setback on dastardly foreigners.

In this case, the setback was the failure in June of China’s state-owned aluminium giant Chinalco to acquire a major stake and board influence in then-cash-strapped Rio and its operating companies. Thanks to a bounce-back in ore prices, due in large part to Chinese demand, and following pressure from London shareholders and Australian politicians alike, Rio was able to raise cash with a rights issue and the sale of some assets.

Chinalco was left at the altar.

That was followed a few weeks ago with the arrest of Rio employees in China — including its China-born, Australian passport-holding, local boss — alleging theft and corrupt acquisition of state secrets. Those charges have yet to be elaborated upon. Meanwhile, an official of the National Administration for the Protection of State Secrets in China has alleged that Rio’s “spying” cost the nation $100 billion in higher iron ore prices.

The claim does not stand up to the most casual scrutiny of trade data. China’s total imports of iron ore over that period were only $168 billion, of which only about 20 percent was from Rio. China was paying the same negotiated prices as Japanese, Korean and other importers. And China’s own mines, which provide more than 50 percent of its needs, were using similar price benchmarks, or selling on the spot market, where prices have been mostly higher than the negotiated ones.

The nonsensical claim was made in an article by an official not directly involved in the spying case, but it was immediately trumpeted by the official news agency Xinhua, as well as by media across China and around the world. Although the article is no longer on the Web site, its claims have not been corrected and its imprint on Chinese minds will not disappear. Meanwhile, foreigners are left wondering when it may be their turn to be subject to blasts of xenophobia or become pawns in power and money struggles between different mainland agencies.

As for the charges of theft of state secrets, their merit can only be judged when the details are known.

It may be coincidence that the Rio episode has occurred at the same time as other attempts to bully Australia. China withdrew entries from the Melbourne International Film Festival because a documentary film about the exiled Uighur leader Rebiya Kadeer was part of the program and then demanded that the National Press Club in Canberra withdraw a speaking invitation to her.

Of course, Xinjiang is an especially sensitive issue at present. But official policies seem to be reflecting in a more muted fashion the ranting that goes on in the Chinese blogosphere. This is not just for domestic consumption. Even minor English-language news Web sites are subject to almost daily outpourings of venomous comment not just against traditional targets like the United States and Japan but also against neighbors like Vietnam, which need to be reminded of their earlier status as subordinates of China. Chinese hackers also have been busy targeting foreign Web sites of which they disapprove.

Beijing is of course at times aware of the dangers of overt encouragement of such thinking, which can not only alarm foreigners but can threaten to get out of control domestically. It has found it easy to whip up anti-Japanese demonstrations, less easy to keep them from running out of control. At the same time, too much self-congratulation over triumphs like the Olympics could backfire on the government when things go very wrong.

For sure, China has understandable gripes about foreign interference in its internal affairs. It has reason to feel targeted by Australian nationalist opposition to its acquisition of resource companies. And it has legitimate commercial interest in weakening the hold of three companies — Rio, BHP Billiton, another British-Australian mining giant, and Vale do Rio Doce of Brazil — on international iron ore pricing.

But it needs to be admired for its wisdom rather than feared for its anger if it is to become the trusted global power it yearns to be.