First off, apologies for being offline for the past few days. I was attending the Annual Buckaroo Banzai Revival Festival out in the suburbs of Beijing and there was no Internet available. Amazingly successful event. I particularly enjoyed the afternoon workshops, live performances and (of course!) the evening encounter sessions. Let’s hope that next year’s event in Yangon will be even better!

OK, that wasn’t entirely accurate. It’s possible I was otherwise engaged over the past few days, although that story is not nearly as entertaining.

Anyway, I will be slowly catching up on the news, but I do feel it appropriate to comment on the reaction to the Rio Tinto arrests. The basic facts here are that a few executives from the Australian mining giant have been arrested by the Chinese government and charged with stealing State secrets/bribing government officials.

Sounds like a straightforward story, yes? Sadly, no. Any time a foreigner gets pinched by the cops in China, the foreign investment community and their boosters (the Chambers of Commerce and various foreign governments, not to mention lots of commentators) go absolutely batshit. This one is no exception.

The government reaction has been measured, but it’s there. CNN has reported on the remarks of US Commerce Secretary Gary Locke:

U.S. Commerce Secretary Gary Locke is raising the question with Chinese leaders, including Premier Wen Jiabao, with whom he is to meet Thursday in Beijing.

“These are of great concern to U.S. investors and multinational companies from around the world that have projects here,” Locke said in an interview with CNN’s Andrew Stevens.

No finger pointing here, but note the emphasis. The US government is looking out for foreign investors here. As it should, I suppose, but the historical baggage in this area is uncomfortable to say the least (see below, far below in this lengthy post, for more on this issue).

Australia was, as should be expected, more forceful:

Prime Minister Kevin Rudd on Wednesday warned China that the world is watching how it deals with an investigation into four detained employees of Anglo-Australian mining giant Rio Tinto Ltd.

Rudd urged China to consider its economic ties with other countries as it dealt with the men, who have been held since July 5 on espionage charges. Three are Chinese nationals and one is an Australian citizen.

“Australia of course has significant economic interest in its relationship with China,” Rudd told reporters in Sydney. “Let me also remind our Chinese friends that China, too, has significant economic interests at stake in its relationship with Australia and with its other commercial partners around the world.”

Smart domestic political move, I suppose, but the veiled threat there seems pretty stupid to me, particularly at this early stage. Toned down language is called for in this case, for a variety of reasons, not least of which is that these guys that were arrested were probably doing the deed.

Yeah, I know, I haven’t seen any evidence, and it’s still early. But anyone that thinks that these ginormous commodity deals between China and Rio Tinto did not include some kickbacks or other shenanigans is living in a dreamworld.

We should always strive to keep it real. Rio Tinto is assuredly not keeping it real, although they really have no choice in the matter from a legal and PR perspective. Check this out, from the NY Times story on the topic:

Rio Tinto officials have complained about the lack of formal charges against the employees and insist that the company has tough ethics codes that forbid any bribery.

Seriously, I nearly pissed myself when I read that, I was laughing so hard.

The Times article is recommended reading as it enumerates a lot of illegal activities taking place in the steel industry, and suggests that this is not about a government witchhunt against Rio Tinto, but rather a crackdown on industry practices:

Industry officials and people with direct knowledge of the government investigation into the four Rio Tinto employees told The Times that the inquiry has now widened to include some of these activities.

In the past week, China has questioned or detained at least 10 steel executives, including shipping agents, traders and members of the country’s steel association, according to the state-run news media and interviews with industry officials.

My feeling is that at the end of the day, you are going to see a whole lot more Chinese folks sent to prison than foreigners. As it is, of the four Rio Tinto people scooped up, only one is an Australian national.

With apologies to Gary Locke, it’s hard to see this as a crusade against foreign investors. Qin Gang of the Foreign Ministry dutifully stated this at a press conference:

China protects, according to the law, the legal rights of foreign companies. At the same time, foreign companies have a responsibility to abide by Chinese laws and regulations.

That’s really what it comes down to, anyway, right? Let’s allow the investigation to play out and see what happens. If the case can be made, then these guys should pay the price. The fact that they work for a huge multinational is not a substantive issue.

Steve Dickinson also sees this as a fairly simple matter of criminal law and (I’m reading between the lines a bit here) basically sniffs dismissively at the uproar. He’s right — read his comments here.

Perhaps most annoying is the knee-jerk reaction of China bashers that, if a foreign national was arrested, the Chinese government must be doing something wrong. Even some of my favorite bloggers have fallen into this trap. Responding to the rumor (since denied by the Foreign Ministry) that Hu Jintao was personally involved in the investigation/arrests, one blogger came out with this bit of invective:

Could this band of thugs be any creepier? The president of the country actively participating in the arrest of foreign nationals following a failed business deal? Really, what fools in the west ever thought Beijing could be trusted?

Holy shit, dude. Either do some more research or put in some qualifiers in your rant. By the way, that blogger was responding to this bit o sunshine from CNBC:

China’s President Hu Jintao personally endorsed an investigation into global miner Rio Tinto that led to the detention of four of its China-based staff, a newspaper said on Monday, citing Chinese government sources.

The investigation appears to be part of a realignment of how China managed its economy in the wake of the global financial crisis, with spy and security agencies promoted to top strategy-making bodies.

OK, aside from the participation of Hu, the complaint here is really that China has ramped up police activity in some of these industries. CNBC is a business network that despises all forms of regulation and industrial policy, so no surprise. I like the way they used the language “spy and security agencies” for that extra sinister touch. Makes one think of a dank basement torture chamber in an Arthur Koestler book. No doubt if the US government was doing something similar, they would praise “Homeland Security’s” protection of American industry.

One last point. The implicit feeling running in the background to all of this seems clear to me. All the foreign commentators, government officials, and scared foreign investors are saying that they do not trust the Chinese government with policing their own turf when it comes to foreign nationals.

Whether this is a well-placed fear or not, someone should tell these guys that this is a slightly touchy subject for anyone in China who has studied modern history. Trust me, corporate communications and government spokesmen guys, steer as far away as you can from language that has even a faint echo of extraterritoriality, or you will be very sorry when the nationalist backlash comes back on you.