Harsh verdict in Rio Tinto trial

The Australian executive Stern Hu was convicted of corruption and industrial espionage and sentenced to 10 years in jail on Monday at the People's Court in Shanghai.

The court also handed down jail sentences of between seven and 14 years to Hu's three Chinese co-defendants.

For international companies, the case was more about how business deals are made in China and how the courts react and the verdict was harsher than expected.

Most observers had expected not more than a slap on the hand and a warning for the British-Australian mining giant, Rio Tinto. The main culprit, Stern Hu, is said to have received around 650,000 euros (over 800,000 US dollars) in bribes and to have illegally obtained commercial secrets from Chinese mining companies and steelworks.

China is cracking down on corruption

"The case is important because it is an example of what foreign governments and companies think of business in China," said a professor for economics in Beijing, Hu Xingdou.

"It also shows how due process of law is developing in China. China is definitely being fair in this case. Our country is cracking down on commercial crimes. Cases of bribery in the billions are being investigated each year."

Lack of transparency

Only a select few Australian diplomats were allowed to be present at the proceedings and only at the hearings on bribery, not on commercial espionage.

Members of the foreign media were only allowed to follow the reading out of the verdict on a screen outside the court. The screen hardly showed Stern Hu.

Generally, observers criticized the fact that the Chinese public were very unaware about the case, receiving little information about the evidence and the hearings.

Hu Xingdou said he thought there should be more transparency in court cases. "China has always been corrupt. Our culture promotes bribery. People are always inviting other people out and giving gifts, so the line between this and criminal activity is not always clear.

"But I think this can change. Take Singapore, most people there are Chinese but they have a clean system. And in Taiwan there is also much less corruption than on the mainland."

Money talks...to the state?

Many foreign business people complain that without bribery next to nothing is possible in China. In a survey taken last summer, the German Chamber of Commerce in Shanghai found that 35 percent of those asked were affected by corruption, either directly or indirectly.

"It depends on the type of industry you're in. If you are doing business with state-run companies, chances are high that you will come into contact with corruption," according to Bernd Reitmeier, deputy head of the German Chamber of Commerce in Shanghai. "With private companies, on the other hand, corruption hardly plays any role."

It recently emerged that an employee at Daimler had bribed a manager at the Chinese oil giant, Sinopec, a state-owned enterprise. Now, Sinopec is demanding that the Chinese government tackle foreign corruption in China.

"How will the Chinese economy develop and how will corruption develop?" asked Reitmeier. "It is clear that the Chinese economy will continue to be largely state-owned and large state programs will drive the Chinese economy. The question is, will corruption continue to spread under these conditions?"

Reitmeier added that he had not seen many positive changes in recent months.

Author: Astrid Freyeisen / sb
Editor: Anne Thomas