Rio row shows risks in playing China's numbers game

By David Stanway

BEIJING (Reuters) - Two years ago, an employee working for the China Iron and Steel Association was jailed for running his own business on the side, selling industry data collected by the association to foreign mining companies.

According to Anbound, a Beijing-based economic consultancy, some of the information put up for sale by the CISA official included raw material inventories, the average cost of imported ores, gross profits per ton of steel as well as production schedules at Chinese mills.

Much of that same information is now the subject of a new investigation that has netted Rio Tinto's Shanghai-based iron ore team and is widening into the Chinese steel industry as a whole.

But secrecy in general is to blame, and China's failure to establish any legally compliant information agencies -- official or otherwise -- has created a system based primarily on leaks, said Anbound.

"The amount of information disclosed publicly is very small... but information from various statistics departments is being taken away by companies and sold off," it said.

On one side is a culture of silence among government officials, and on the other, a growing thirst for reliable statistics on the Chinese economy and its industries.

The situation has led to the establishment of dozens of semi-official agencies whose legal status remains unclear. Customs data, for example, is available through a number of competing private firms set up on the side by government officials.

"Government and enterprises should realize that by (providing) publicly available information, they can to a large extent satisfy the demand for commercial intelligence ... and reduce the space available for corruption and espionage," Anbound said.

The National Bureau of Statistics, which holds regular press conferences and releases its data in a timely and regular fashion, should be held up as a model, Anbound said.

"ABNORMAL MEANS"

Rio Tinto's chief iron ore salesman, Stern Hu, an Australian, is facing charges not only of buying state secrets but also obtaining sensitive industrial information through "abnormal means," according to state news agency Xinhua.

But with large tranches of industrial data hidden behind a wall of bureaucratic silence, "abnormal means" are sometimes the only ones available.

"We pay for information wherever we can get it, and I'm not very concerned about whether it is abnormal or not. We're a Chinese company getting Chinese information for Chinese clients," a Shanghai-based analyst with a futures brokerage said.

But foreign research firms and consultancies are now questioning their own sources of information and wondering if they could also fall foul of China's catch-all secrecy laws.

"We are obviously paying close attention to this and checking our data sources," said one.