Randomly Noted

A mutiny in Australian politics is not unheard of, but certainly this one has caught many people by surprise.
Kevin Rudd was increasingly unpopular as prime minister in voter opinion polls for a number of reasons—his rollback of a pledge on a carbon emissions scheme and a plan to levy a new tax on profits in the mining sector–but to remove him so close to an election, with one expected within a matter of months, is a high-stakes gamble.

The anecdotal feedback among voters so far is that the manner in which the centre-left Labor party leadership has ousted Rudd, and installed Julia Gillard as the country’s first female prime minister, was all a bit unpleasant.

The move came swiftly, and most probably in response to internal party polling that would have shown Rudd–who came to power on a wave of optimism and popularity in late 2007–would struggle to win a federal election against his Liberal party counterpart, Tony Abbott. The government was in danger of becoming the first since before World War II not to secure a second term.

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Massey's shares have fallen 10%

Massey Energy has seen its stock get hammered today following word late yesterday of a deadly explosion in one of its West Virginia mines in which 25 workers were killed. Some investors have apparently dumped the stock thinking lost production of tighter regulations will hurt future profitability. (The stock has shed some $492 million in market capitalization today).

But clearly some others think the sell off is making the stock cheap. Another interesting measure is money flow – it’s a measure that looks at the amount of money coming into a stock and the amount going out the door. You would think with a 10% selloff that Massey investors were in a mass unloading mode. Not true. Instead, there is a net $25 million positive money flow into the stock.

Day 2 of Australian government officials speaking frankly, and sharply, about the shameful sham Shanghai trial of Australian citizen Stern Hu and three Rio Tinto colleagues who are Chinese citizens. Monday, when the sentences came down against the Rio Tinto Four, Australian foreign minister Stephen Smith rightly described them as “harsh.”  Today came Prime Minister Kevin Rudd saying China failed to “demonstrate to the world at large transparency that would be consistent with its emerging global role.” As I’ve said again and again, we know nothing – at most next to nothing – about the case. We don’t know if the four Rio employees are guilty as charged. All we know is they were denied due process at every stage of the case, from their detentions last July to the lengthy prison sentences handed down this week. For its part, Rio Tinto is so eager to remain in China’s good graces – the mining company makes a lot of money there – that it has fired the four defendants while declining to speak out on their behalf. At least Australia’s government is saying what needs to be said.

The trial of the Rio Tinto Four has come to an ugly end with lengthy prison sentences for the Chinese-born employees of the big miner, including Australian citizen Stern Hu. Reporters were allowed to witness the trial’s final day via closed-circuit TV – but no further details about the alleged crimes were forthcoming. We really have no insight into what the four people allegedly did, nor do we know who was on the other side of alleged bribes and exchanges of commercial secrets. As Australia’s foreign minister, Stephen Smith, lamented, “there are serious unanswered questions” about the charges relating to theft of commercial secrets such that “the international business community will want to pursue with China.” Little was heard from Rio Tinto itself – the Australian company has left public statements to Canberra during the eight-month process, and in the past week seemed to distance itself from its employees. This even though the workers’ guilt was by no means established via an open and transparent proceeding. With the exception of Google, Western companies are much too eager to remain in Beijing’s good graces.

My colleagues report that some or all of the four Rio Tinto employees on trial in China for alleged bribery said they accepted payments of one sort or another. Given the  lack of clarity and transparency in the process – which began with their detentions last summer – it’s impossible to know whether the defendants are acting voluntarily or under duress. Also, we don’t know what has happened to the alleged bribers – the employees of Chinese steel mills who offered the alleged bribes to the Rio Four. Are they getting away with alleged crimes? Have they been secretly detained, tried and punished? Why is it we know about the people who allegedly accepted bribes but not those who paid them, and whose enterprises allegedly benefited? You may recall that the saga began last July when China imprisoned the Rio employees – one Australian citizen and four Chinese nationals – on allegations they stole national secrets. Later, Beijing decided it was a routine criminal matter. Even as the closed trial began today in Shanghai, Rio Tinto’s CEO Tom Albanese was shaking hands with Chinese Premier Wen Jiabao in Beijing’s Great Hall of the People.

Rio Tinto employees Stern Hu, an Australian citizen, and three Chinese citizens, remain in jail – yet their case supposedly moved forward Monday. What we actually know is scant, and it’s not from Chinese authorities, who have been happy to remain silent since imprisoning the four last July. What little information reporters have comes from the Australian government, which has tried to keep an eye on Hu’s case, and it’s this: Chinese police handed the Rio Tinto employees’ cases to prosecutors. Colleagues James T. Areddy and Alex Wilson write: “While Chinese officials issued no announcement of Monday’s move, Australia’s government said it was informed that evidence supporting accusations of criminal behavior … had been handed to prosecutors by the Shanghai Public Security Bureau.” And so the murky case “proceeds” either to a quick trial or further delays – we don’t know, because China’s legal system lacks transparency. As my colleagues write, “The case has fueled a political storm in Australia and debates in corporate boardrooms whether it is a normal criminal matter, as Beijing has contended, or a sign of how China may use economic might to challenge multinationals.” Here’s my previous blog on the matter.

DJN colleague Elisabeth Behrmann reports China’s probe of the four Chinese nationals and the Australian – all employees of giant miner Rio Tinto – will conclude Jan. 11. This comes from the Australian government, not China, which means, of course, their ordeal may not end next week. Moreover, it’s not at all clear that Chinese authorities will disclose details of the charges against the four. Our story says “further extensions to the police probe are possible.” Here’s a recent blog on the subject.

As we contemplate China’s continued economic ascent this New Year, let’s not forget what it means to do business in China. In July, four Rio Tinto employees were detained. The three Chinese citizens and one Australian, Stern Hu, remain in prison on vague charges of bribery and theft of commercial secrets. Life goes on for their colleagues; Rio Tinto and other international miners have begun a fresh round of iron ore price negotiations with China Inc. – while the four languish. One trusts Rio and the Australian government are still doing what they can, behind the scenes, to secure for the detainees a modicum of legal and procedural transparency – if not their complete release. The lesson of the Rio Tinto four is simple: If you do business in China and vex someone in power, your employees may be in jeopardy. It’s not unlike Russia, except, as I’ve blogged in the past, China is essential to many Western companies’ growth plans whereas the Economy of Putin can be avoided. As the 2010 iron ore talks heat up in coming weeks, we’ll keep an eye on how China comports itself and how the four Rio Tinto detainees – victims of last year’s aborted round – fare.

Australia has everything going for it: abundant natural resources coveted by the world’s foremost industrial powers; banks that didn’t take stupid risks with customers’ money; a front-loaded stimulus-spending scheme that appears to have worked; a robust economy recovering so decisively that the central bank is well into a rate-hike cycle; and a decent pension and healthcare system. All this is demonstrably true (with the usual caveats) and it’s also the script to which Chris Bowen, the country’s financial services minister, is hewing to on a trip to New York City and London this week. What’s more, Australia has a refreshing, pragmatic and probably wise attitude toward foreign investment. One hears not a peep of protectionist rhetoric out of the lefty government  - which stands in contrast to their American counterparts. Chinese money has flowed into Australia in recent years as government regulators okayed the lion’s share of acquisitions of resources firms, notes Bowen, whose boss is the Mandarin-speaking Prime Minister Kevin Rudd.  Stern Hu (no relation), the Australian citizen and employee of Aussie-based mining giant Rio Tinto, languishes in a Chinese prison with three Chinese colleagues under the murkiest of circumstances. But Bowen is adamant the case won’t weaken Australia’s approach to China as a foremost trading partner. No doubt the Rio Tinto 4 is “a sensitive issue” in Australia, and Bowen says the Rudd administration “made our views very clear that the Chinese government needs to consider this is not good for their reputation in terms of doing business in China.” Chinese government officials continue visiting Australia, he adds, and “we make the point about Stern Hu on those visits. But you can’t let that downgrade the importance of the relationship.” Asked about foreign money flowing into Australia’s already frothy property market – and the sense one has that some of that money is coming from China – Bowen says, “That’s something we’re relaxed about.” Continue reading…

Nearly unnoticed yesterday (Monday) was a signal from China that it intends to continue backing away from the Rio Tinto case in which the state security apparatus detained four Rio employees in China on suspicion of espionage linked to global iron ore talks – and on behalf of another country, as reported by China’s domestic media. As Rio has a base of operations in Australia and one of the four, Stern Hu, holds an Australian passport, Beijing’s finger seemed pointed at Australia, from which China purchases massive amounts of natural resources. Unspoken but not forgotten as the news developed and Australian politicians expressed dismay was the sense that China was retaliating against Rio Tinto for walking away from a  $19.5 billion deal with Aluminum Corp. of China (known as Chinalco) earlier in the year – a major stake sale to Chinalco which might have helped ease China’s concerns about slaking the country’s massive appetite for natural resources.

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