Op-Ed Contributors

Guard against economic spies

By Ou Chengzhong (China Daily)
Updated: 2010-04-13 08:17

Compared with other countries, China has to amend its legal and systemic loopholes to protect its commercial secrets

The months-long legal dispute involving mining giant Rio Tinto's graft case and violation of China's commercial secrets highlights the urgency for the country to guard against industrial espionage and protect its growing economic activities from similar misdeeds.

On March 29, the Shanghai No 1 Intermediate People's Court sentenced Stern Hu, the Australian executive who led Rio Tinto Group's China iron ore unit, to 10 years' jail for taking bribes from China's steel mills and infringing on its commercial secrets. Three of Hu's Chinese colleagues, Liu Caikui, Wang Yong and Ge Minqiang, were also found guilty and jailed between seven and 14 years.

The four employees of the Australian iron ore producer who were indicted on Feb 10 pleaded guilty to receiving 92.18 million yuan ($13.5 million) in bribes, the Xinhua News Agency cited court documents as saying on March 23. The malpractice by Hu and his colleagues during China's talks with foreign companies on iron ore imports last year, such as buying over some Chinese steel mill workers to access China's State secrets, caused enormous losses and damage to the country's economic safety and national interest, the Shanghai municipal bureau of security said. It is estimated that China's steel industry has to pay an additional 700 billion yuan for iron ore purchases because of the leakage of some of its commercial secrets, a source said.

The Rio Tinto case turned out to be the tip of the iceberg -- foreign interest groups have clandestinely accessed China's commercial secrets in the past few decades. As early as the 1970s-80s, when China opened its doors to the outside world, the country's traditional craftsmanship on cloisonne enamel and Xuan Paper, a high quality rice paper specially made for art purposes in Xuancheng, Anhui province, was quickly stolen abroad, causing huge losses to Chinese producers of such work. Similarly, it is not rare for foreign firms and investment banks to employ a number of "special information practitioners" to scramble China's classified commercial information and trade secrets under the guise of legitimate roles.

As opposed to traditional political and military espionage, stealing commercial information and trade secrets from a country is not expected to bring the victim immediate economic losses. However, as foreign competitors use these secrets under new marketing ploys or to manufacture new products, the country's economic interests will be seriously victimized. Commercial espionage in essence aims to use an economic bait to snare economic and commercial information from its rivals, before using such information to generate larger economic returns.

The leakage of a country's commercial secrets to foreign competitors will also endanger its national safety, as indicated from history. The disclosure of a country's steel manufacturing and consumption data will expose to foreign competitors information on the production of its steel-related weapons and military.