China Tightening Control Over Steel Industry

FILE - In this June 26, 2009 file photo, a steel worker labors at a small-scale steel plant in...

FILE - In this June 26, 2009 file photo, a steel worker labors at a small-scale steel plant in Shenyang, northeast China's Liaoning province. China's stolen secrets case against an Australian working for Rio Tinto Ltd. may have more to do with Beijing's push to tighten control over its huge steel industry than trying to dampen industrial espionage. Chinese officials have complained for years that steel companies paid too much for foreign iron ore, failing to translate China's position as the world's biggest steel producer into clout at the bargaining table. (AP Photo, File)

(AP)

China's stolen secrets case against an Australian working for Rio Tinto Ltd. may have more to do with Beijing's push to tighten control over its huge steel industry than trying to dampen industrial espionage.

Chinese officials have complained for years that steel companies paid too much for foreign iron ore, failing to translate China's position as the world's biggest steel producer into clout at the bargaining table. A state-sanctioned industry group was brought in to fix that by taking over price talks. But the China Iron & Steel Association was tripped up, Chinese state media say, because its bottom line was leaked to Rio.

"The arrest of the Rio Tinto employees earlier this month appears to be the latest salvo in an ongoing battle between CISA and the major Chinese steel mills," the Chinese newspaper Economic Observer said.

The battle reflects the clash between the communist government's insistence on controlling strategic industries and the commercial priorities of China's state-owned companies.

The Rio employees, detained July 5 during iron ore price talks, are accused of stealing state secrets. The government has released no details but state media say the employees — including a China-born naturalized Australian, Stern Hu, who runs Rio's Chinese iron ore business — are suspected of paying bribes for information on China's negotiating stance. Chinese news reports say executives of at least five major Chinese mills are being questioned.

"I think it's clear they are unhappy about the amount of information that the miners have been getting," said Martin Ritchie, Asia editor of industry journal Metal Bulletin. "Perhaps they realized at some point they were unhappy with that and looked for ways to address it."

China's steelmakers, long a centerpiece of communist planners' enthusiasm for heavy industry, have grown at explosive rates over the past decade, driven by booming manufacturing, construction and shipbuilding. They now consume up to 60 percent of global iron ore production of 850 million tons a year, nearly all imported.