Over the past decades a fundamental change has been occuring in the world economy especially China’s economic growth has been notable among the countries. In terms of China’s massive demand for resources and the strength of Chinese exports, Australia could be beneficial. As a result, the business relationship between Australia and China has been consolidated during these trading years. China is the second largest export market after Japan and third largest trading partner for Australia. Alternatively Australia is the ninth largest trading partner for China, thus the bilateral trade volume is increased annually in the growth rate of 30 percent (Moens.G,2007,p.56).

Rio Tinto is the one, powerful multinational mining and metal company which is operated business to greatly import its porducts to China as the 19 percentage of company’s revenue is acquired from China market in 2008 (Chen, S. 2010). After Rio was declined an offer of $US20 billion from the state owned Chinalco, the arrest and sentence of Stern Hu and his colleagues in 2009 was occured for allegations of bribery about $US14 million and stealing business secrets from state-run steel company. Consequently the China Iron and Steel Association reflected by the action of stop buying iron ore for the next two months from Brazil’s Vale, BHP Billiton and Rio Tinto (Mascitelli&Chung, 2011). As a result the trade relationship between Australian and China is collapsed in some way that Foreign Minister Stephen Smith said transparency and openness could have facilitated Australia and the international business community in understanding and dealing with the matter (Sainsbury,M.2010).

The case has raised the cold war tension between the essential economic relationship between Australia and China that the trial over the court’s decision was operated in a closed courtroom session. Regarding to the imprisonment of the four executives from 7 to 14 years respectively. Mr Smith stated that “tough sentence” (Sainsbury,M.2010). In spite of the court found out the substantial evidence that Mr. Hu was guilty of bribery, he was sentenced to 10 years. Therefore, I would like to argue that it was not justice verdict as in the case, appendix 3 shown that China is the rank of 21 out of 22 countries in the transparency of international corruption ratings. Corruption has been an important issue for almost every society all around the world, but some researchers suggest that multinational firms can and have obtained economic advantages by making payments to those officials. As an example, the president of Lockheed, Carl Kotchian made $12.5 million payments to the Japanese officials in 1970s to be secured their large order of Tristar jet from Nippon Air (Jack,R.2012). Thus, it is important to understand the foreign business culture when doing business in differnet country.
However doing business with China is not effortless as many corporations operated in China faced the major challenges in different cultural context and business pratices. The economic system of China, socialist characteristic is the totally dissimilar to the western systems. Socialist characteristic may refer to the unique system that administrated by the central government with the uncertainty of free market economy. In contrast, the regard systerm could not match with the firms or enterprises that systematically established foreign market economic structures (Mascitelli.B&Chung.M, 2011).
Therefore, the Stern Hu’s case would increase the worries of managers and observers that the risk of doing business in China due to the lack of understanding and transparency. There were many arguments along with the phenomenon of this case and it has caused many contradicted questions that whether foreign company should continue to invest in China by its unstable policies (Wilson.J,2011). Therefore it is crucial to evaluate that the complication of China’s economical and polical approches and carefully adaptation of situation in its business environment.

Although the four executives of Rio Tinto has been arrested and the tension between countries rose in its economic enviornment at that meanwhile, Australia and China appear to have continued the business operation and free trade negotiation. According to the announcement in late 2009 , Australia’s largest trade country became the China that overtaken Japan, the previous biggest trade partner. In addition, it can be considered that the two countries acquired even better trade achievements in later years. Consequently like the case in Stern Hu’s situation, all the executive and observers might have to emphasize the different regulatory and economic system and also consider their business conduct in China.

Therefore in my opinion, Rio Group should have comprehended the significance of it’s host country cultural nuance. Then it can be enormously surpportive in negotiation process not only Australia-China business relationship but all the other trade partners relationships. As the world leading company, the level of profit obtained by Rio Tinto Group is increased in positive trend that the company reached US$ 1.079 billion in last year (Annual report 2013). To maintain the essential relationship in the future, Rio Tinto should investigate more precisely about the host country’s economic behaviours by political, economical, social, technological, legal and environmental factors to be deeply analysed in order to maintain the effective and efficient business operation.

Chen, S. 2010, Rio Tinto in China, case study distributed in BUS305 Global Business Society and Environment. Macquarie University, 16 August.

Jack,R. 2012, “ Ethics in International Business”, International Business, 2nd edn, McGraw-Hill Australia Pty Ltd, Australia.

Mascitelli,B. and Chung,M. 2011, “ Australia- China and Stern Hu : cold war corruption or cooling relations”, Global Business and Technology Association, United States, pp. 600-604.

Moens,G. 2007, “ The Importance Of The “Rule Of Law” In The Development Of The Australia-China Business Relationship”, National Observer , no. 74, Spring, pp. 54-60.

Rio Tinto, 2013 “Annual Report” viewed 22th Aug 2014,

Sainsbury,M. 2010, “ Questions remain after Rio Tinto executive Stern Hu sentenced, says Stephen Smith”, The Australian, viewed 22th Aug 2014,

Wilson,J. 2011, “ Resource nationalism or resource liberalism? Explaining Australia’s approach to Chines investment in its minerals sector”, Australian Journal of International Affairs, vol. 65, no. 3, June, pp. 283-304.