Ore dealer may escape spy charges

CANBERRA - Australian Rio Tinto iron ore negotiator Stern Hu has been formally charged in a move that could indicate China is easing its previous determination to proceed with allegations of espionage.

Hu and three Chinese colleagues are instead facing criminal counts of bribery and infringing trade secrets, which carry lesser penalties than violation of state secrets. If found guilty, Hu could be jailed for up to seven years.

The four Shanghai-based iron ore executives were arrested and detained last month in a move that strained relations with Australia and dismayed foreign corporations in China.

Australian diplomats were permitted to see Hu for only the second time this week, despite strong calls for better access.

The allegations involve the gathering of sensitive economic and commercial data that revealed China's bottom line in iron ore negotiations.

Prime Minister Kevin Rudd had earlier warned China that its actions were being watched by the rest of the world and could damage the nation's trade, but was told by Beijing to respect China's judicial process in a case that involved actions that would be illegal under Australian law.

His arrest on accusations of espionage followed long and bitter negotiations over the price of Australian iron ore, a deep sense in Beijing that China has consistently been swindled into paying more than it should, and the decision by Rio Tinto to drop a proposed stakeholding by state-owned miner Chinalco.

Beijing has clamped down on alleged corruption in dealings between companies and foreign suppliers. Hu was arrested under secrecy laws that can be written retrospectively.

Yesterday the New York Times, citing a brief statement issued by the official Xinhua news agency, said Hu and his colleagues had been charged after preliminary investigations showed they had obtained commercial secrets through improper means.

The newspaper reported it was still unclear if more serious charges of violating state secrets would be included, or whether Beijing had backed off under international pressure.

"If China chose not to charge [Hu] with violating the country's state secrets law, it would drastically alter the case because legal scholars say that prosecutions under that law are not transparent and are difficult to defend," the New York Times said.

In Canberra, the Department of Foreign Affairs and Trade confirmed that Beijing had informed Australia of the charges against Hu.

FRAYED RELATIONS

DEFENCE THREAT
China was identified as the biggest potential threat to regional stability in Canberra's latest defence white paper.

STUDENT SAFETY
Beijing expressed concern for the safety of its students studying in Australia, following a number of attacks that coincided with the beatings of Indian students that led to a diplomatic crisis with New Delhi.

UIGHUR PROTESTS
China was also upset by Kevin Rudd's condemnation of the crushing of the protests by Muslim Uighurs in Xinjiang Province, and by Australia's refusal to prevent a speaking tour by Uighur activist Rebiya Kadeer, who this week met MPs in Canberra. Beijing had earlier tried to prevent the screening of a documentary about Kadeer at the Melbourne International Film Festival, and this week unsuccessfully attempted to convince the National Press Club to axe an address by the activist.

- ADDITIONAL REPORTING: AAP