Australia urged China to deal quickly and transparently with the trials of four Rio Tinto mining staff accused of bribery and stealing commercial secrets, amid growing investor concern over dealing with Beijing.
China on Wednesday indicted the four China-based employees of Anglo-Australian Rio Tinto, the world's second-largest iron ore producer, including Australian Stern Hu, its top negotiator at the time of his arrest last year.
We continue to emphasize to the Chinese authorities the need for the case to be handled transparently and expeditiously, said a spokesman for Australia's Foreign Minister Stephen Smith.
The four are set to stand trial in Shanghai. If found guilty, they could face up to seven years in jail on the commercial secrets charge and up to 20 years on the bribery charge, said Zhang Peihong, a lawyer for one of the accused Chinese nationals.
Rio on Thursday voiced deep concern about the nature of the charges leveled against its staff.
Our primary concern remains the well-being and care of our colleagues and thus it would be inappropriate for us to comment further as the legal process continues, chief executive Tom Albanese told reporters after releasing RIO's annual results.
Rio said its long-term outlook remained strong as China, as well as India, continues to urbanize and industrialize over the next two decades.
Albanese said China had become Rio's single largest customer.
China is embroiled in a series of trade disputes with other countries, while Internet search engine Google has said it is getting harder to operate in China and has threatened to pull out of the country over censorship and hacking concerns.
At the center of the Rio case is Beijing's demands for a lower yearly fixed price for iron ore, an essential commodity to drive Chinese steel plants, and Rio's refusal to lower the benchmark price it had reached with Japanese and Korean mills.
China expert Hui Feng at the University of Queensland in Australia said the Rio case was a sign Beijing was determined to play tough with foreign firms.
I think this is a clear signal to foreign business that the government is serious about cracking down on what they see as illegal activities, Hui said. In the past the government largely turned a blind eye to such activities.
But Andrew Gilholm, senior analyst at Control Risks in Seoul, said the Rio and Google cases did not reflect a new Chinese line and that authorities were aware of the need to work with foreign investors.
I think these are very specific and quite isolated cases rather than a wider trend that's going to affect most foreign businesses in China, Gilholm told Reuters Television.
...I think, generally speaking, China is very much aware that it needs open trade and investment. It still needs foreign investment, it's still very committed to that basically open market and good relations with foreign investors.
Rio's share price was up 2.62 percent ahead of its second-half results, due out Thursday afternoon, outperforming the overall market, with metals up across the board.
The indictments will add to investor uncertainty about the power Chinese authorities can wield over business in the world's third-biggest economy.
Hui agreed with Google founder Sergey Brin that it was getting harder to operate in China in recent years. How to deal with the political risk is the real issue, she said.
Foreign investors have called for China to clarify its complex laws to make it easier to conduct business.
I think this is a clear signal to foreign business that the government is serious about cracking down on what they see as illegal activities, Hui said. In the past, the government largely turned a blind eye to such activities.
China is Australia's biggest trade partner. Australia exported $15 billion worth of iron ore to China in 2008, or 41 percent of China's iron ore imports.
Resource-hungry Chinese firms have been behind several tie-ups with Australia firms in the past year.
In January, Australia approved China's biggest-listed gold miner Zijin Mining Group's $498 million bid for Australia's Indophil Resources NL, clearing the way for Zijin's dream of becoming a top global copper producer.
But the Rio case and several high profile failures by China to buy into the country's resource sector in 2009 have strained ties diplomatically and commercially.
The collapse of a bid by China state-owned aluminum group Chinalco to invest $19.5 billion in Rio, which would have been China's biggest overseas investment, left China vulnerable to just two suppliers -- the Rio/BHP combination and Brazil's Vale -- which control 70 percent of global iron ore trade.
The Rio case poses election-year difficulties for Australian Prime Minister Kevin Rudd, a China expert under pressure from media and political opponents at home to use his relationship with Beijing's leaders to help free Hu.
Australian opposition lawmakers and key minor-party senators have pointed to the Rio case as reason for the government to limit Chinese investment in Australian resource firms.
(Additional reporting by Rob Taylor and James Grubel in Canberra)
(Editing by Ron Popeski)