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US trade official to raise Stern Hu's case wi -

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US trade official to raise Stern Hu's case with Beijing

Sue Lannin reported this story on Thursday, July 16, 2009 12:24:29

PETER CAVE: The top US trade official will raise the arrest of the Australian Stern Hu and his
colleagues with the Chinese Premier Wen Jiabao. US Commerce Secretary Gary Locke says the issue is
of great concern to US investors and multinational companies around the world.

The Australian Prime Minister Kevin Rudd has warned China that economic ties could be risk,
although Beijing has been very keen to play down the concerns.

A Chinese professor of international relations says the case is limited and that it won't damage
trading relations. But an unconfirmed report says that Rio Tinto and other foreign companies have
already begun moving their employees out of China.

Here's our finance reporter, Sue Lannin.

SUE LANNIN: Two-way trade between China and Australia was valued at $74 billion last year, just
behind Japan at $76 billion.

Shi Yinhong, a professor of international relations at the People's University in Beijing, says the
arrest of Stern Hu and his colleagues won't affect trade ties, despite the tense political
environment.

SHI YINHONG: Well maybe a lot of China's high officials in Chinese enterprise, steel enterprise in
steel make some corrupt actions and this is the case but this is isolated legal case. But of
course, it is just happening in a not-so-wonderful political atmosphere. This is limited downturn
in bilateral relations.

SUE LANNIN: He says the arrest of the Rio Tinto executives for allegedly stealing state secrets is
not linked to Rio Tinto's rejection of a deal with state-owned Chinalco. And he doesn't think
foreign investment in China will be effected by the case.

SHI YINHONG: China's investment in general is from many, many other countries. I don't think after
that this one case will have a big impact upon whole of the picture.

SUE LANNIN: Did Chinese Government authorities arrest the Rio Tinto employees because Rio Tinto
rejected the deal with Chinalco?

SHI YINHONG: I don't think so. I think it started because previously there were some invest
transactions between, for example, between China and the United States, or between China and other
countries that failed and these kind of things have not happened.

I think that the Chinese Government now have some legal proofs to show that some employees of this
Australian corporation are involved very deeply.

SUE LANNIN: Australia sold $18 billion worth of iron ore to China last year but iron-ore prices
plunged amid the global financial crisis and Japanese and South Korean steel producers have already
won a 33 per cent cut. Negotiations between the world's big miners and Chinese steel mills go on,
despite the allegations of spying and bribery by Rio Tinto - claims the big miner has denied.

Commodity analyst James Wilson is from stockbroker DJ Carmichael in Perth.

JAMES WILSON: Over the last few months China has been importing record amounts of iron ore. I think
they did in the last quarter about 160 million tonnes or more, with a vast proportion of that
coming from Australian iron-ore producers such as BHP and Rio Tinto.

News overnight is telling us that the Chinese have agreed to a provisional price of a 33 per cent
cut for their finders price, which is what the Koreans and the Japanese agreed to. It's likely that
the price negotiation will be sort of extended I guess in the medium term, but in the short term
they have agreed on a price

SUE LANNIN: Rio Tinto was still looking to China as its major market. It says global iron-ore
production rose 8 per cent in the June quarter to a record level.

James Wilson says trade will continue, despite the current tensions.

JAMES WILSON: In my opinion I think the strength is with the producers, in the same token that we
are dealing with our biggest customer and that's not a relationship that you want to strain too
much given that it's decades old.

PETER CAVE: Resources analyst James Wilson, ending that report by Sue Lannin.