What is the connection between the Rio Tinto 'spy-gate' (as the mainland media are calling it) and the 60th anniversary of the People's Republic of China?
To many of us who see business as business, this question may sound ludicrous. To people living in the mainland, it is not.
Some background first. China consumes more than half of the world's iron ore. As the biggest buyer, mainland steel mills, however, have never been the price-setters.
Instead, like the much smaller buyers in Japan and South Korea, the country has always been the price accepter. During the past five years, the contract price of Australian iron ore has increased 260 per cent.
Given the financial crisis and the early correction in commodities prices, Beijing played hardball this time, asking for a cut of more than 40 per cent, while Japan and Korea settled for 33 per cent.
However, the signs are China may once again have to accept what is being offered, thanks to the collective negotiating system that is full of holes.
It's a system that represents only large steel producers whose share of capacity has dropped from 90 per cent to about 65 per cent over the years and whose pockets are well fed by selling iron ore to the smaller producers at a spot price that is double the contract price they are paying.
The incentives for tough negotiations are low.
The public will surely ask 'why does this happen?'
China is a country that is never short of people asking 'why?' But in 2009, the question has to be taken seriously.
It is the 60th anniversary of the new China. It is the year for the Communist Party to show the people how much it has done in terms of raising the nation's economic and political status.
Yet, at the same time, it is the year that the book Zhong Guo Ke Yi Bu Gao Xing (China Can be Unhappy), that calls for a hawkish foreign policy in both the economic and geopolitical arenas, has become a bestseller.
It is the year that Australia's Rio 'dishonourably' (to quote Xinhua) walked away from a mining deal with a major Chinese enterprise as the commodities price rebounded.
Another failure, if not humiliation, in the international negotiating arena is the last thing Beijing wants.
What better way is there to relieve the pressure on the authorities, or to divert attention, than the pointing of fingers at some mainlanders who have 'spied' for the foreigners and 'sabotaged' China's position in the negotiation?
I am not saying that the allegations of spying and bribery levelled at Rio have been created solely for political reasons. That would be ludicrous.
After all, in China, the authorities will have little difficulty in finding evidence of bribery. Their files are full of such cases. It is only a matter of when to use them. And an espionage accusation, if proven, does serve a purpose in the iron ore negotiations.
But reading the mainland media, you will see why I smell politics, particularly in the timing and the way the trigger was pulled.
First of all, the state security ministry came out two days after the detention of the Rio staff to officially confirm events to reporters. When did you last see the secret police talk to the press? Remember how it took five months for the arrest of the former Sinopec chairman for taking 196 million yuan in bribes to receive official confirmation?
Meanwhile, local media, including many official mouthpieces, have been giving overwhelming coverage to the Rio case in the past two weeks.
To list a few: On Wednesday, the country's top talk-show host said on prime time China Central Television that there was a lack of business secrets awareness and a need to introduce rules on economic espionage. The same day, the China Daily reported on its front page that executives of all 16 steel mills taking part in the talks had been bribed by the Rio staff.
Yesterday, Xinhua carried details of a report in the International Herald Tribune on the espionage tricks employed by foreign businesses, including money, sex and favours.
On the internet, discussion is rampant. Mainland netizens called the four Rio officers arrested mai guo zei (traitors). Blogs that called for their heads appear on various mainstream websites.
In a country where the media and the internet are tightly controlled, none of these could have appeared without an agenda and top-level blessing.
But what is this rare transparency aimed at? Certainly, not the Rio Four, nor the Australians and the West.
Emphasising the threat of foreigners is always a good way to unite your people behind the government. Hasn't chairman Mao Zedong told us and showed us all about this?
By the way, if you tuned into any mainland television channel over the past few months, there is a good chance you will have watched some spy drama where the villains are either foreigners or the Kuomintang and the heroes are the communists. What a coincidence!Topics: Economic Geology Iron Mining Iron Ore