Australian Broadcasting Corporation

Businesses Cannot Ignore China

Cheng Li joined the Australian Broadcasting Corporation to discuss the arrest of Rio Tinto executive Stern Hu and the need to understand the continually increasing business opportunities in China.

Phillip Lasker, host: Risk or no risk, China specialist at the Brookings Institution, Professor Cheng Li, says the business world can't afford to ignore the Asian giant. He says the arrest of Rio Tinto executive Stern Hu was a carefully designed event, possibly a sign of displeasure with Chinalco's unsuccessful quest for a major stake in Rio Tinto, or anger at the Federal Government's defence white paper which China might have seen as a threat. A short time ago, I spoke to Professor Li.

Professor Li, welcome to Lateline Business.

Cheng Li: Thank you.

Lasker: Is it safe to say that these are trumped up charges against Rio executive Stern Hu and there's a broader agenda there?

Li: Well, we do not have enough evidence for that, but usually when Chinese Government made that decision, it was made very carefully, as calculated by, you know, what they want to gain. So, there's a broad context that made them to make the decision. So this could be related with kind of revenge and with certain things of the company or maybe even Australia.

Lasker: So you think it's possible that this is revenge for the failed deal between Chinalco and Rio Tinto?

Li: Well, that could be, but also could be the unhappiness with the Defence white paper. But one thing is certain, that the Chinese always what they call ‘Kill chicken to skew monkeys’. There's a message they want to send, and of course we know that President Hu Jintao probably also personally endorsed that (inaudible) arrest. So that certainly it's not the decision made by local government officials. So it's quite big. But it does not mean that China is not interested in trade, economical relation with Australia. They do. But at the same time, you do see the rise of kind of a confidence. They believe that China could afford, you know, to take a harsh, you know, line or measure - deal with this kind of possible dispute or possible things they don't like.

Read the full interview » (external link)