China tries to allay Rio and Google fears

BEIJING // The Chinese government has moved to reassure foreign businesses operating in the country after negative international publicity over Google's withdrawal from the mainland and the jailing of four executives from the Rio Tinto mining company.

The dispute with Google over censorship and the corruption case involving Rio Tinto were individual cases that did not reflect the experiences of most foreign companies, a spokesman from the Chinese ministry of foreign affairs said yesterday. Qin Gang said China offered a good investment environment in which foreign and domestic investors were treated equally. But consultants for foreign companies have insisted that many overseas firms are finding China an increasingly tough place to conduct business because of a bias towards awarding contracts to Chinese companies.

Mr Qin's remarks contrast with comments from an unnamed government official last week after Google shut its self-censored google.cn website and redirected internet users to its Hong Kong search engine, the results of which the US company does not filter. Despite being the world's leading search engine, Google lags the local favourite Baidu in China, and was accused of having "violated its written promise" by ceasing to censor its results.

The government official also expressed "discontent and indignation for [Google's] unreasonable accusations and conducts" after the search engine said mainland hackers had violated Gmail accounts. Just days later, an Australian and three Chinese executives from the Anglo-Australian miner Rio Tinto were jailed for terms of between seven and 14 years for taking bribes and stealing commercial secrets.

The case made world headlines as Australia expressed concerns over a lack of transparency in the Chinese judicial process. Jiao Jie, a senior analyst specialising in telecommunications at BDA (China) in Beijing, said that without concrete measures from the Chinese government to loosen controls over the internet, yesterday's remarks from the foreign ministry's spokesman would change little. "If there's no formal announcement or notice, you cannot say [Mr Qin's comments] will attract importance from the foreign internet companies," Ms Jiao said.

The Foreign Correspondents' Club of China this week warned there had been several cases of reporters in China and Taiwan having their e-mail accounts, including Yahoo accounts, hacked into. But Duncan Clark, the chairman of BDA, a foreign investment advisory company, said the Google and Rio Tinto cases were "distractions". Mr Clark said of more significance to international companies in China were the concerns that Chinese firms were being favoured in procurement from government and other organisations.

Mr Qin addressed that issue yesterday when he said competition would be governed by "survival of the fittest", adding that when China entered the World Trade Organisation, domestic companies were warned they would have to compete with those from overseas. Mr Clark said, however, foreign companies producing a range of goods including wind turbines and smart cards were being pushed out by a preference for "indigenous innovation", something he described as "protectionist".

"It has very wide scope," he said. "They say it's just government departments but it's influencing state-owned enterprises. The fear is it's spreading. They're not allowing [organisations] to buy foreign." * with Dow Jones