Rio Tinto, state secrets, smoke and mirrors

It is also a minefield for the locals. The regulation proclaims that any person who talks to the media, and in particular the foreign media, without first securing clearance from the government may be subject to prosecution.

A state secret can also be the result of using official data released for domestic and foreign media and analysts, to correctly arrive at a conclusion that contradicts or questions the veracity of official policy or data.

So what of Stern Hu?

His role as a senior executive is to have a firm understanding of the global iron and steel market allowing him to provide the ore best suited for an individual steel mill's requirements.

It is a simple matter of due diligence, not espionage, to accurately assess China's steel mills capacity, technologies, costs and weaknesses. This would be well known by any professional in the ore mining and foreign steel industry.

It is therefore a daunting and dangerous task for Stern Hu to exercise his responsibility to provide the ore best suited to meet his clients' needs since under the law in China, knowing the technical specifications and capability of the state-owned pillar industries is classified as a state secret.

Since BHP-Billiton, Vale, Murchison, Fortescue, and every other miner have the same information, why not incarcerate their local executives?

It is possible that Stern Hu's incarceration is due to his Chinese ethnicity and therefore charged with ignoring his loyalty and responsibility to China before his duty to his employer and shareholders.

It is more likely he is the pawn to exert pressure on the ore majors into dropping their multi billion-dollar claims for breach of contractual obligations by China's iconic steel industry majors.

Such action will focus the attention of the global media on China's steel industry to seek the reasons for breaching obligations of international supply contracts.

Is there another reason?

State media has been trumpeting a booming steel industry and Beijing's expectations for an economic revival due to China’s stimulus package.

Iron ore stockpiles, however, reached around 34 days supply and steel mills are incurring increasing losses. Coal and coke shipments were also on the decline in volume and price due to falling demand. Since the end of December 2008, China has been deferring, cancelling, and refusing to accept some deliveries of iron ore.

Such data may be construed as indicating a difficult period for China's steel industry and the economy in general, both of which are reliant on a rapid turnaround in the global economy, and that is a state secret.