China Inside Out: 10 Irreversible Trends Reshaping China and its Relationship with the World

CHAPTER 8

The Global Sugar Daddy

A BIG STICK

Stern Hu was one of the few people around the world not surprised by the court’s verdict: guilty of bribery and industrial espionage. Before he walked into the Chinese courtroom, sequestered from his family and his government for more than half a year, he already knew his accusers had signed, sealed, and delivered the judgment to the Chinese court. Hu was a Chinese, a naturalized Australian citizen sent to China to be the lead negotiator representing the interests of Rio Tinto, one of the largest producers of iron ore in the world. For much of 2009, Rio Tinto and other major mining players had been in intense negotiations with Chinese steel manufacturers represented by the China Iron and Steel Association about discounts on the global benchmark price of iron ore for large buyers in 2010. The association demanded a cut of 40 percent off benchmark prices; the miners offered only a 33 percent discount. Stern Hu was Rio Tinto’s man in China, talking with the general managers and heads of China’s top steel producers almost on a daily basis. He and his top lieutenants knew their competitors from top to bottom, their businesses, and their personal foibles. In October 2009, state enforcement officials arrested Hu and three of his Chinese associates, who were Chinese nationals. The police confiscated Rio Tinto computers from the company’s ...