China’s tantrums and a justice system in question

Rio Tinto

The allegations relating to the arrest of Stern Hu and his colleagues, and China’s claims against Rio Tinto are becoming more like the tantrums of spoilt brat than those of a responsible trading nation.

The cause for these juvenile reactions lies more in a steel industry in shambles, internal power struggles and face saving for the CCP leadership, plus blatant commercial advantage.

Following the failure of the consortium of the major steel mills to secure the price cuts demanded, Beijing took over the lead negotiating role of the China Iron and Steel Association, assuming that it could use its political muscle to bring the miners to heel and accept its pricing demands. China ignored the tradition of accepting the 33 per cent discount benchmark negotiated with neighbours Japan, South Korea and Taiwan. China demanded a 40 per cent cut.

China’s desperate efforts are just not an attempt to save its corrupt and inefficient steel industry, but a blatant attempt to gain a major pricing advantage over its competitors, especially neighbours, Japan, South Korea and Taiwan.

The move failed, infuriating the CCP leadership which is now desperately seeking an excuse for the failure of its juvenile tactics.

Blaming Rio Tinto can achieve two crucial goals, both of which are for local consumption to regain face for the CCP.

The first is to dishonour Rio as a business partner. The intention is to claim that Rio’s staff bribed Chinese steel executives to obtain “state secrets” relating to the operations of China’s steel industry, and in so doing Rio deliberately undermined Beijing’s direct efforts to negotiate a “fair price”. Beijing claims that these steel industry “secrets” are undermining China’s steel industry and also China’s economy.

Second, Beijing claimed that Rio’s reversal of support for the massive Chinalco bid for Rio, clearly demonstrated its dishonourable business behaviour.

To enhance its global marketing power, Beijing claims that Rio then sided with BHP Billiton to manipulate the global iron ore supply and further undermine China’s massive steel industry. This delayed China’s economic recovery resulting in the need for its US$586 billion stimulus package.

China’s steel industry

Corruption is a daily part of China’s steel industry where mill competes against mill and province against province as well as personal gain. One only has to scrutinise the allocation of iron ore trader licences, the recipients and their government contacts. Rising iron ore prices and steel prices boost local GDP, regardless of the profitability of the steel mills.

The impact of the global financial crisis on China’s economy is beginning to appear far greater than China is willing to admit.

CCP policy of controlling CISA (China Iron and Steel Association) negotiations is not about competing in a global market, but more about using China’s political muscle to manipulate the global market to favour China’s shambolic steel industry.

Politicisation of the CISA however is destroying the steel mills’ confidence in the consortium. It is also likely to result in the “removal” of many experienced Chinese steel executives. The outcome will be detrimental to China’s steel industry and increase friction between steel mills, the CISA and Beijing.

This Rio Tinto arrest charade and “dummy spit” by Beijing is backfiring and undermining the Chinese government’s credibility in the global marketplace.

Steel is the pillar industry for China’s economy, and as head of the CCP’s nine-member standing committee, Hu Jintao wants a greater say in the economic decision making process that is currently the jurisdiction of the State Council, led by Wen Jiabao.

The entire Rio farce has all the appearances of a power play in which Hu Jintao is preparing the stage to lay the blame for any worsening economic downturn on the state of China’s steel industry on Rio. Rio would then be in the frame for any steel industry setback and flow on effect, exonerating the CCP from blame.

China’s judicial process is not about justice

Wang Shengjun, president of China’s Supreme People’s Court, concisely summed up the purpose of China’s justice system in his article in the CCP journal, “Seeking Truth” in which he exhorted the judiciary to:

• “... pay more attention to maintaining state security and social stability.”
• “... boost consciousness of safeguarding the power of the regime.”
• “... fully develop our functions as a department for proletarian dictatorship.”

Wang Shengjun clearly confirmed that the justice system’s primary objective is to maintain state security and social stability by safeguarding the power and legitimacy of a proletarian dictatorship.

The implication of that philosophy gives a greater understanding for the use of excessive force by the police and military in brutal suppression of those demonstrating against environmental impact on public health, disenfranchisement, and official corruption.

Wang Shengjun’s philosophy also gives added support for increasing claims of disenfranchisement, brutality, imprisonment and death sentences experienced by Tibetans and Uyghurs, especially in recent times.

It is the manner in which the judiciary applies its immense power, however, that gives added support to criticism and claims of blatant political bias in China’s legal system. This is particularly apparent when it comes to their dealing with claims involving state secrets, official corruption, environmental degradation, unemployment, ethnicity, and related demonstrations.

In 2008, China’s senior judiciary vowed to implement the bidding of the CCP and “use the judicial apparatus against the party's foes” in dealing with demonstrations before and during the Olympics, including those in Tibet and Xinjiang. China’s judiciary has played a critical role in "expediting the conviction of counterrevolutionaries" in CCP political purges throughout recent decades.

Understanding the legal system

In China, the CCP is the law and that leaves the obvious question of the veracity of evidence given by executives of state-owned enterprises.

To understand China’s due process of law requires knowledge of appointments to the judiciary.

Prequalification for the judiciary requires mandatory membership of the Chinese Communist Party, and that requires absolute obedience and loyalty, whereby duty is first, and foremost to the interest of the CCP, and then China as a whole. Everything else has a lesser priority.

There are severe penalties for breach of loyalty to the CCP that can seriously affect the future prospects and lifestyle of both individual and family, be they judge, prosecutor, defence lawyer, defendant or witness.

For the judiciary, this raises the obvious question when determining the admissibility of evidence that may prove contrary to the interest of the CCP and the state. If a judge were to rule in favour of a defendant, it would negate the state’s allegations, cause official embarrassment and loss of face. This would be in direct conflict with the judge’s duty and loyalty to the CCP. The common practice by the judiciary “where the interest of the state is perceived as being at stake,” is to refuse to hear such actions. There is extensive evidence of this practice across China, and not only in the ethnic areas.

Given this allegiance and implied “duty and loyalty” to the CCP by those judging, prosecuting, defending, or even giving evidence, justice is sacrificed in preference to breaching loyalty by failing to protect the interests of the CCP and the state.

Not all in China’s legal fraternity comply with the demands of the CCP. There are a number of highly professional defence lawyers dedicated to defending those subjected to official abuse. Despite overwhelming evidence, the courts reject the cases and many of these lawyers are beaten, jailed and prevented from practice because of their professional ethics and reliance on due process of the law in China.

Credibility of evidence of executuves of state-owned enterprises

Like the judiciary, membership of the CCP is mandatory for those aspiring to secure or currently hold executive positions in state-owned enterprises, and creates a similar conflict of interest with dire consequences. To give evidence against the state is in breach of their sworn loyalty to the CCP and will jeopardise the future prospects and lifestyle of the individual and family.

There is a clear and definitive conflict of interest when seeking justice from China’s justice system. Sworn loyalty and commitment to the interests of the CCP is used as a clear form of duress that is imposed on all members of the CCP not to answer a question truthfully if it questions the credibility of the state’s allegations.

China’s trouble-shooter, Vice Foreign Minister, Liu Jieyu visited Canberra and spoke to Prime Minister Kevin Rudd, defending the arrest of Stern Hu and urging Canberra not to interfere in the case, claiming comparisons of criminal activities within the two countries.

The guiding role of China’s judicial system and commitment to the ideals, interests and policies of Chinese Communist Party can only raise serious question about the veracity of the claims of Vice Foreign Minister Liu Jieyu when comforting Mr Rudd and the Australian government with his statement that:

“Stern Hu and his co-workers would receive a fair trial.”

Mr Rudd has been outspoken of his extensive experience in China and knowledge of the system, and one would therefore expect him to have a sound and thorough working knowledge of China’s legal system.

Does Mr Rudd truly believe that Stern Hu and his colleagues will receive a fair, even if not open hearing, under the declared bias of China’s judicial system?

Corruption - the pot calling the kettle black

While China is busy trying to vilify Rio Tinto with corruption, it conveniently overlooks allegations by Namibia of corruption by Nuctec while under the management of Hu Jintao’s son Hu Haifeng. Nuctec is a leading manufacturer and supplier of security systems for airports, docks and terminals.

The allegations relate to airport scanning equipment supplied through an estimated US$65 million Chinese soft loan to the government of Namibia. On signing the contract, Namibia’s government authorised the immediate payment of about US$12.8 million as a “manufacturing deposit” that was deposited into the Nuctech agent’s account in the Chinese Import Export Bank in Namibia.

A routine check carried out under Namibia’s Financial Intelligence legislation revealed that the bank account was emptied almost immediately and paid out in secret commissions that were traced to five prominent locals with government connections and a Chinese national in Namibia. Payment of such commissions is illegal in Namibia.

There are suggestions that the Namibian “secret commission” model is standard practice involving China’s soft loans made to developing countries. There are claims of corruption involving Hu Haifeng for Nuctec security systems and relates soft loans in the Philippines and South Africa.

Hu Haifeng is now the current Chairman of Nuctech’s powerful parent company, Tsinghua Holdings.