Iron-ore price negotiations with China are a "giant chess game" according to a former employee of Brazilian miner Vale, with experience of the brinkmanship that characterizes the annual contract talks. We are not sure whether Stern Hu, the Australian national in Rio Tinto’s iron-ore division who has been detained on suspicion of stealing state secrets from China, is afforded the luxury of recreational pursuits in his cell. But it would appear he and his three Chinese colleagues have become pawns on board that stretches well beyond their personal situations. Although officials have sought to distance the detention of the "Rio four" from the ongoing and increasingly acrimonious iron-ore price talks and Aluminum Corp of China’s failed investment in Rio, it’s likely the former played a role. While Chinese Iron and Steel Association (CISA), which represents the industry’s big fish, pushes for a 40% price cut, Hu was apparently busy signing up smaller steelmakers to contracts with a 25% discount. The big fish weren’t happy and now they have struck back. But what, legally speaking, has Hu actually done wrong? No one knows. China is well-known for its legal gray areas and they don’t come much grayer than when commercial, regulatory and state interests coincide. Foreign companies operating in China have faced this for years, although rarely are the incidents so high profile. We won’t finish on a low, or a gray, note. Today’s news update includes a couple of notable successes for foreign firms: Ericsson has signed equipment deals worth US$1.7 billion with China Mobile and China Unicom as the 3G rollout continues, while General Motors expects sales growth of 20% in China this year following encouraging first-half numbers. And then Bank of China International is setting up a private equity fund to focus on domestic media… Ah. Does this mean ownership in an already gray sector is going to become still grayer?
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