Nothing that follows is personally approved by David Penberthy or Rupert Murdoch, let alone Kevin Rudd. That’s the beauty of writing for a free media in a democracy.

Nicholson's take on the Hu case in The Australian.

However, it’s equally ludicrous to suggest that every word that appears in China’s state-owned media every day represents the personal views of Chinese president Hu Jintao.

I don’t know Hu - who really does? - but I’m not sure he would have chosen the noun “perfidy” to describe Rio Tinto’s betrayal of Chinalco a couple of months back. Yet that phrase was quickly interpreted as the semi-official, if colourful, position of China Inc to the collapse of the deal - purely because it ran on the “state-owned” Xinhua news agency.

Likewise, China News Agency’s report last month of a giant iron find in the country’s northeast was accepted as a China Inc negotiating tactic in the increasingly fraught negotiations with Rio Tinto over iron ore prices.

Therein lies one of the China’s biggest problems as it embraces the corporate world - the perception that Beijing exerts an iron grip on every state-owned enterprise, including the media outlets, in the giant nation. It’s the reason why Chinese companies seeking to invest in other countries are, rightly or wrongly, viewed with a special level of suspicion. And it’s the reason why it’s extremely difficult, from the outside, to understand the strange mix of business and politics at play in the case of Rio Tinto’s Stern Hu.

“State owned does not mean state run.” I can’t remember how many times I heard that line during Chinalco’s ultimately doomed romance with Rio Tinto. Chinalco, its advisers, its lawyers, the local embassy, the Chinese press are to be commended for their Labor-like ability to stay “on message”, all spinning in the same direction from the moment the deal was announced in February to the moment it fell apart in May.

The trouble was that too many Australians - in business, politics and on the street - didn’t buy it. And after the events of the past week we now know their scepticism was justified. Regardless of Stern Hu’s guilt or innocence, China’s admission that the accounts and contracts of state-owned but supposedly independent steel companies are “state secrets” has given the game away.

There are 150 or so state-owned enterprises (or SOEs) that report directly to the central Chinese government. Then there are thousands of others that are subsidiaries of those 150, or who report to provincial or municipal governments. Beijing’s influence may be fading as more SOEs forge alliances with overseas partners and list on foreign stock exchanges. But there is still evidence that the various levels of the Chinese government have a hand in the strategy and running of the big state-owned firms beyond the appointment and removal of chairmen, despite China’s pained insistence that state-owned firms are independent, fully fledged commercial beasts. In particular, in times of tension or crisis – say, difficult iron ore negotiations – the hand of government is never far away.

Even if the politburo doesn’t meddle on a day-to-day basis, it’s nonsense to suggest that 100 per cent owners do not exert some kind of “control” over their businesses. You’d almost expect them to. Frank Lowy, Kerry Stokes and Murdoch all “control” their listed companies with significantly smaller stakes. In western markets, you would never expect a 100 per cent business owner to abrogate all say in the running of a business, and simply sit back waiting for the profits and dividends to roll in.

In any case, it’s the perception that is as important as the reality. Given the opaque nature of most Chinese businesses, and their relatively recent emergence on the world stage, it’s too big a leap of faith for most to accept that they are truly independent of a non-democratic government. It’s a barrier they’ll never fully overcome.

Most commented

10 comments

Show oldest | newest first

    • Freedom says:

      02:14pm | 15/07/09

      Countries like China and Singapore bully their citizens and and opposition. And because the rest of the world puts up with it, they get away with it! We need to send a message before it is too late.

    • iansand says:

      03:12pm | 15/07/09

      The Chinese government may not directly own or control individual businesses, but every Chinese businessman I have met has close ties to at least one level of government (and in China that means the Communist party).  They appear to make very few decisions without considering government attitudes or reaction to that decision.  Sometimes that can mean disguising a transaction, but the government is always a factor.

      The country is, after all, a dictatorship.  In fact the idea of state directed private enterprise seems to me to be closer to fascism than any other form of government.

    • Madison says:

      04:28pm | 15/07/09

      Say what you will about Chinese business democracy or lack thereof. The fact is China has managed unprecedented GDP growth at an average of 10% sustained for close to two decades now. So what if the strategy is implemented by a centralised authority? So long as it works I say.

    • Retired says:

      04:39pm | 15/07/09

      I’m surprised (and perhaps disappointed) that the question of 8 or 9 billion dollars of penalty payments has not been further explored. As I understand, Stern Hu was, on behalf of Rio, seeking payment for delayed/short/cancelled shipments of ore as part of the contracts. Could it be that a large part of the affair is a smokescreen to delay or negate the requirement for China Inc to make those payments. A further “loss of face” and outflow of cash without perceived benefit.
      Nor has the possibilty that Hu is seen as a “traitor” been explored. Afterall, Hu is Chinese. The reality is that China promotes the idea that despite the citizenship and passports of overseas born Chinese, those persons are Chinese first and, for convenience only, citizens of the other country.

    • Rob says:

      05:11pm | 15/07/09

      Has anyone consdiered he *IS* guilty?

      I’m sure all those Wheat Board execs said the same thing (as did their supporters:

      “No way, *I* am *Australian* thus I am completely honourable and would never bribe any one or break a law…”

    • Peter E Barnes says:

      05:39pm | 15/07/09

      Good point Rob. “Baseless and reprehensible” - that’s what the Australian Ambassador to the US said in response to the allegations by the evil Canadian and US wheat industries about the AWB’s deal with Iraq.

    • James says:

      10:34am | 16/07/09

      Rob: Yes, but whether or not Stern Hu is guilty or innocent - he has (allegedly) been held without charge for 10+ days without any legal representation.  *IF* he did commit the crimes he would’ve done so knowing the risks he was taking in regards to imprisonment, and he only has himself to blame, but that doesn’t make his treatment right.

      Madison: “So long as it works…”
      Well who is it really working for? the millions working in sweat shops?  The environment?  The millions of homeless and starving?  The abused in many regions of ‘china’, including Tibet, Xinjiang, “Mongolia” etc., the culturally and religiously oppressed?

      You’re right, it is working - to further the divide between rich and poor, and to rape the environment of everything it’s worth.

    • Adrian says:

      11:07am | 16/07/09

      Madison said: “Say what you will about Chinese business democracy or lack thereof. The fact is China has managed unprecedented GDP growth at an average of 10% sustained for close to two decades now. So what if the strategy is implemented by a centralised authority? So long as it works I say. “

      10% a year coming off an extremely low base - the amount of capital they’ve had to invest to bring that country back up to speed after decades of mismanagement is phenomenal. Frankly if they weren’t doing 10% a year there’d be something wrong. And it doesn’t take a dictatorship to decide to invest in a country’s infrastructure. If you need proof there’s a small country to the east of China called Japan, that managed growth rates above 9% from 1953-1965.

      So now Madison you have a choice - a dictatorship “that works” or a parliamentary democracy “that works”. Your choice.

    • Madison says:

      09:55pm | 16/07/09

      There are countless third world countries, with many of them run by democratic governments who have tried and continuously failed to lift themselves out of poverty. China may have done it under a communist regime but at least they are making serious progress. Regardless of political regime, as long as the people in power are drafting progressive policies then there really shouldn’t be any qualms. In any case, the communist party of China has taken on a more capitalist stance in business dealings to mirror their western counterparts. As for the sweatshops, they exist as a result of the first world’s insatiable hunger for cheap imports. Can you really blame them for simply meeting demand?

    • miantiao says:

      04:07am | 21/07/09

      Socialism with special Chinese Darwinist-capitalist characteristics!

      Socialism in China is very different to the idea of Western socialism where we regard it as welfare, policies that put in place mechanisms that provide citizens with help and assistance when life takes a turn for the worse. The social welfare systems of the majority of Western socialist-capitalist democracies stem from empathy for the plight of fellow human beings.

      Socialism in China is summed up with one word, state-owned.

      I’ve had many long and interesting conversations with middle class Chinese (able to afford the exhorbitant fees to attend English language schools) who nearly all explain socialism from a Chinese point of view in this way.

      Anecdote; walking to wrk one day i passed the usual group on the bridge selling sugar cane and other fruits and snacks, said my hellos, bought some pinapple on a stick and continued on my way. A hundred yards further on sitting outside the doorway of an expensive new western coffee chain-store was a young man about mid-twenties. In front of him was a large old iron cup with a few coins in it. So far all seemed quite normal, the usual street scene, beggars, peddlers, office workers, construction workers, street cleaners and traffic light attendants, all going about their business.

      I don’t usually give to beggars much these days, because I found out that some unscupulous people organise begging groups. Vulnerable citizens, many of them young physically disabled orphans being the best money pullers. Anyway, was just going to ignore this young man, he looked fit and healthy after all. That was until I spied his ulcerous lower right leg.
      I asked what had happenned to it. He said it began as a minor injury suffered at work. He had no money to see a doctor to treat what was only a flesh wound in need of cleaning and sterilising, and he couldn’t time off work to allow it to heal.

      His lower right leg was black and purple and reeked like fly infested bait left on the beach. A gaping hole the size of a cricket ball exposed his leg bone. I put 50RMB into his cup, i knew he was going to die, i looked into his eyes and felt the random arbitrary nature of life. Thing is, that young man didn’t have to die.

 

Facebook Recommendations

Read all about it

Punch live

Up to the minute Twitter chatter

Daniel Piotrowski

RT @ToryShepherd: Onya, @KRuddMP“@newscomauHQ: BREAKING: Kevin Rudd has come out in support of same sex marriage: http://t.co/CFaHrxyV5G

Daniel Piotrowski

RT @newscomauHQ: BREAKING: Kevin Rudd has come out in support of same sex marriage: http://t.co/2KEO6yEx5F

Daniel Piotrowski

True Rudd style. Bazillion word folksy statement

Daniel Piotrowski

RT @Rob_Stott: Like a lot of Republicans in the US, it's much easier to support gay marriage when you're no longer in a position to do anyt…

Recent posts

The latest and greatest

The Punch is moving house

The Punch is moving house

Good morning Punchers. After four years of excellent fun and great conversation, this is the final post…

Will Pope Francis have the vision to tackle this?

Will Pope Francis have the vision to tackle this?

I have had some close calls, one that involved what looked to me like an AK47 pointed my way, followed…

Advocating risk management is not “victim blaming”

Advocating risk management is not “victim blaming”

In a world in which there are still people who subscribe to the vile notion that certain victims of sexual…

Nosebleed Section

choice ringside rantings

From: Hasbro, go straight to gaol, do not pass go

Tim says:

They should update other things in the game too. Instead of a get out of jail free card, they should have a Dodgy Lawyer card that not only gets you out of jail straight away but also gives you a fat payout in compensation for daring to arrest you in the first place. Instead of getting a hotel when you… [read more]

From: A guide to summer festivals especially if you wouldn’t go

Kel says:

If you want a festival for older people or for families alike, get amongst the respectable punters at Bluesfest. A truly amazing festival experience to be had of ALL AGES. And all the young "festivalgoers" usually write themselves off on the first night, only to never hear from them again the rest of… [read more]

Gentle jabs to the ribs

Superman needs saving

Superman needs saving

Can somebody please save Superman? He seems to be going through a bit of a crisis. Eighteen months ago,… Read more

28 comments

Newsletter

Read all about it

Sign up to the free News.com.au newsletter