China turns the heat on Rio Tinto and Australia

In response to Australian Prime Minister Kevin Rudd's threat, China (See: Rudd warns China over Rio Tinto detention) ratcheted up the pressure on global mining giant Rio Tinto yesterday through Chinese government newspaper the China Daily, which ran a front page story saying that the miner had bribed the "entire Chinese steel industry."

China Daily, Beijing's English-language newspaper reported yesterday that Rio Tinto executives in Shanghai bribed "key officials" of Chinese steel mills to gain access to sensitive information like production and inventory levels among others at state-owned steel mills.
Quoting an un-named industry insider, the paper  said that Rio executives threatened to cut iron ore shipments if steel mills refused to hand over the data it wanted.

China has widened the scope of investigations on certain employees from 16 Chinese steel mills taking part in annual contract price negotiations for iron ore as well as officials from China Iron & Steel Association, the representative body of steel mills.

China's acrimony over iron-ore price contracts with the world's third largest miner Rio Tinto escalated on Sunday 5 July, when it arrested four Rio employees, including its marketing manager and top iron ore price negotiator Stern Hu, in Shanghai on charges of espionage and stealing state secrets. (See: China arrests four Rio Tinto employees)

Although the Chinese have not bought any formal charges, the four Rio Tinto executives are accused of bribing officials at Chinese steel companies and stealing state secrets related to the ongoing long-term iron ore settlement talks, which violated Chinese law as well as international business morality.

The Shanghai police have also seized computers from Rio Tinto's Shanghai office, which could contain sensitive information on the miner's ongoing long-term iron ore price negotiations with China as well as financial and iron ore supply contracts signed with small Chinese steel mills last month.