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China widens probe of steel industry

By Zhang Qi and Tong Hao (China Daily)
Updated: 2009-07-14 07:13

Anshan Iron and Steel Group Corp (Ansteel) is among five major Chinese steel makers reported to be embroiled in the espionage scandal linked to Anglo-Australian miner Rio Tinto, the latest episode in a widening investigation into alleged leaks of State secrets.

"Executives from Ansteel are being investigated (in the Rio Tinto-related case)", a senior manager at a domestic steel maker told China Daily Monday, requesting anonymity.

Apart from managers at the Liaoning-based steel mill, executives from China's largest steel maker Baosteel Group Corp, as well as Laigang Group and Jigang Group, are under investigation, domestic media reported.

Officials from China Iron and Steel Association (CISA), the industry body, are also being investigated, they reported.

Tan Yixin, a senior executive in charge of iron ore imports and exports at China's eighth largest steel mill, Shougang, was arrested July 7 for alleged commercial crimes.

Tan is said to be close to Australian Stern Hu, a Rio Tinto executive who is being detained by China on espionage charges.

When contacted by China Daily Monday, Shougang, Laigang, Jigang and the CISA refused to comment.

Related readings:  China denies restriction of ties between domestic, foreign companies  Iron ore import licenses may be canceled for 20 companies  FM: China to handle Rio spy case 'according to the law'  Govt: Proof against Rio spies sticks  Iron ore talks go into extra time  Rio spy case may hamper iron ore talks  Rio employees 'held for espionage'

The investigations follow last week's detention of Hu and three domestic staff members.

The inquiry into Rio Tinto began before it broke off its $19.5 billion investment deal with Chinese metals firm Chinalco and before Rio Tinto formed an iron ore joint venture with rival BHP Billiton on June 5, the Sydney Morning Herald reported Monday.

Chinese media reports said that Rio Tinto and other major international ore suppliers might have bribed executives to get access to figures such as stock levels, production schedules and volumes, financial information and purchase plans -- data that is sensitive and places China at a disadvantage during price talks.

Australia Monday summoned China's ambassador for a second time to press for details of Hu's detention.

But Canberra will not use "megaphone diplomacy" to pressure Beijing to release the Rio staff, Finance Minister Lindsay Tanner told Reuters Television Monday.

"Our dealings with the Chinese government are going through formal channels," Tanner said.

The detention comes at a sensitive time, when China's steel industry, led by CISA, is in intense negotiations with Australian and Brazilian iron ore producers over prices.

Baosteel, Shougang and Angang are among the 16 delegation members at the talks for fixing 2009 prices. The annual talks, which were supposed to conclude by June 30, are still continuing.

The Rio Tinto case, experts say, is a sign that commercial espionage is growing in China.

"I think it is time for the Chinese government to regulate the behavior of foreign interest groups," said Jiang Yong, director of the Center for Economic Security Studies at China Institute of Contemporary International Relations.