Tech execs rocked by Rio Tinto arrest

The arrest of Australian mining executive Stern Hu on charges of 'spying' has rocked the community of technology executives working in China, but is yet to shake their resolve to work in the region.

Hu, an iron ore salesman and Australian citizen working for Rio Tinto, was arrested July 5 after being accused of 'stealing state secrets' in his business dealings with Chinese steel mills.

Hu has been detained for ten days without being charged.

Hu's case has highlighted the concerns many businesses have with doing business in the lucrative Chinese market, where joint-ventures need to be Government approved and where the Chinese Government plays a strong hand in the affairs of many of the nation's largest businesses.

Australian Prime Minister Kevin Rudd told a press conference today that governments and corporations alike are watching the Wu case "with interest" and warned China that it "has significant economic interests at stake in its relationship with Australia."

Lloyd Ernst, founder of hosting company WebCentral and now a director of SinoCode, a software development joint venture between Australia and China, told iTnews he had concerns the Wu affair might develop into "something bigger" over the months ahead.

"I am here in China now, and it's definitely the number one topic of discussion among the ex-pats," he said. "One concern is: how will this affect the way Australians are seen by the Chinese?"

Ernst was concerned that the strained relations between the Australian and Chinese Governments may create similar tensions for Australian organisations doing business in China.

The issue was sensitive enough that Telstra Media, which has significant investments in the Chinese market, opted not to comment for this story.

Austrade, which last month led a delegation of Australian software companies on a trade tour to China, also declined to comment.

"This remains a consular matter at this stage," a spokesperson told iTnews. "The Department of Foreign Affairs and Trade have carriage of responsibility for assisting Australian nationals detained overseas."

But Ernst said the issue won't distract SinoCode from its mission to forge new links between Australia and China.

"At this stage it won't stop me investing in China," he said. "China still offers great opportunities; she is still the best looking girl on the dance floor."

A very different market

Ernst said doing business in China presented challenges and opportunities.

"Doing business here is not black and white, it's shades of grey. I have always taken a very conservative approach, because it is very easy for someone to turn the contrast knob and you find you are on the wrong side of the spectrum," he said.

"This case has really reinforced the importance of 'face'. I don't think Australians are aware of how much local media coverage the Chinalco/Rio Tinto deal received here in China. It was heralded as a major deal here in China when it was announced, and then when it fell apart, people were disappointed."

The 'shades of grey' are further complicated by the fact that many large organisations in the Chinese market are part-owned by the Chinese Government.

Todd Trevillion, Chief Executive Officer at Australian digital media company Gruden says most of the company's China-based clients are "Government-owned or Government-managed" in some respect.

"It does require a completely different approach, although to date our experience has been very positive," he told iTnews. "They expect us to accept their terms, both budget, timeframes and payment terms. There is typically no contract or legals - it's all based on trust.

"There is also a very different procurement approach where it is heavily relationship based (more so than usual) and being in with the right people is crucial to working successfully with the Chinese Government."

Richard Li, executive chairman of Australian-owned digital content company GoConnect, which also has significant operations in China, said he is unconcerned by the Wu affair.

"Our China operation is managed by Chinese nationals who report to our board," he told iTnews.

"The Chairman of [parent company] Sino Strategic International is also well connected within China at both the provincial and Central Government levels.

"We have yet to know why Stern Hu has been detained. I think we should not jump to conclusions one way or another."