The conviction of Stern Hu and his sentence has seen a new watershed in the development of the law in China in relation to commerce and the secrets of the Chinese State. Hu was involved in negotiations over the price of iron ore with the Chinese Steel Industry including Shougang Steel, or Capital Steel, which is the biggest steel manufacturer in Beijing. This company and some of the other large chinese steel manufactures were seeking a better deal from companies such as BHP Billiton and Vale as well as Rio. Hu had been told by the representatives of the company that they were not prepared to accept the Japanese benchmark price from Nippon Steel. Later on, the chinese steel company managed to secure the deal for a great price from Rio.
A few years later down the track, we find that, Hu is sentenced to 10 years in jail for bribery and for stealing trade secrets. The others involved in the matter were given sentences varying from 7 to 14 years. THe judgments include very detailed and clear accounts of the malfeasance invovled. However, in Hu’s case, there is not as much specifically said about it. Because in China many of the largest companies are state owned enterprises, the commercial secrets of these companies are often considered state secrets as well which is why the charges became much more serious. However, it appears that these individuals are certainly not the first and very unlikely to be the last to be involved in graft and corruption in the chinese steel industry as it is a ubiquitous trait of the way the industry works in China. “It’s not clear where the line is between legitimate information-gathering and criminal commercial-secret stealing,” said two international experts on Chinese law, Jerome Cohn and Yu-Jie Chen of New York University.
Hu’s lawyer stated that the current evidence is not sufficeinet to show that Hu actaully stole information which caused damage to the state to the tune of 1 billion yuan as is alleged. In China, the judgments of courts are only published at the discretion of the court and it is not compulsory as it is in the Western Systems. From the reasoning of the courts which have been published, it appears that the authorities in China are likely to be far more aggressive in their regulation of the steel industry. One of the activities complained of is the collection of information about chinese steel production by Rio Tinto’s offices in Singapore. Also, part of the factor which indicated that the whole process is subject to broader political interference was the fact that the incarceration of the Rio Four occured by Rio refused to sign up to a $US19.5 billion deal with Chinalco which was reported very negatively by all of the state owned media and the state owned company itself in China. This case highlights some of the challenges of doing business in China because of the legal and political environment there.
