Australia shocked at severity of punishment

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The Independent Online

The arrest of Stern Hu, an Australian citizen, and three Chinese colleagues last July was greeted with consternation in Mr Hu's adopted home country. Much more than his liberty was at stake: China is Australia's largest trading partner, and its shipments of iron ore to China account for a sizeable chunk of export income.

While trade relations have not, apparently, been affected, Australian businessmen were shocked yesterday by the severity of the sentences handed down. "A slap on the wrist might have been expected ... but this [Mr Hu's sentence] is far longer than we thought," said Paul Bartholomew, China editor of the website Steel Business Briefing.

The three-day trial in Shanghai has sparked concerns about the pitfalls of doing business in the world's third-largest economy. Ann Kent, from the Australian National University's (ANU) College of Law, said Mr Hu's 10-year sentence "sends a very strong message to foreign investors and foreign companies to be very wary of this market and their activities in China".

China's rapid industrialisation has fuelled an ever-rising demand for Australian minerals, particularly iron ore. Chinese companies have invested heavily in Australian mining ventures. Most observers believe the trading relationship is too important to jeopardise, with China reliant on Australian raw materials and Australia dependent on that key export market.

Ron Huisken, an East Asia expert at the ANU's Strategic and Defence Studies Centre, predicts that relations will cool somewhat. "To the extent that the trial – and a legal system that seems to be subject to government management and direction and is not transparent – has left a bad taste in Australians' mouths, I would expect it to have a lingering effect on the quality of the wider relationship. For example, the Foreign Investment Review Board [which has to approve all major investment in Australian companies] could be more disposed to saying 'no' down the line.

"It [the Hu affair] may change the tenor of relations in ways which are essentially invisible. But it's almost unimaginable that you would see the relationship put at genuine risk," he added.

Rio Tinto, which has reportedly cleared itself of any wrongdoing at a company level in the Hu affair, announced a US$1.35bn deal with the Chinese aluminium giant Chinalco earlier this month to develop an iron ore mine in West Africa.