He was once one of China’s most powerful steel executives, buying iron ore in quantities that fuelled Australia’s economic boom.
But Deng Qilin, 66, will serve 15 years in prison after being convicted for corruption and bribery during his 10-year reign as chairman of Wuhan Iron and Steel, one of Australia’s biggest resources customers.
Mr Deng, the former general secretary of China’s Iron and Steel Association, was also fined 5 million renminbi ($992,000) by the Zhongshan People’s Intermediate Court for taking advantage of his position.
Chinese business magazine Caixin reported that among the allegations investigated, was that a member of Mr Deng’s family had set up a trading company that won a long-term iron ore contract with an overseas miner, then on-sold it to Wuhan for a large profit.
Fairfax Media understands that BHP Billiton, which signed a $US9 billion, 25-year deal with Wuhan and three other Chinese steel mills in 2004, has always dealt directly with Wuhan.
Wuhan has an Australian office that is a major shareholder (12 per cent) in South Australian miner Centrex Metals.
Wuhan’s former Australian managing director, Guo Liaowu, was “persuaded” by China’s corruption watchdog to return to China in July, after Interpol issued a “red notice” for his arrest for accepting a bribe.
He had sat on Centrex’s board for a year, before suddenly departing in 2010.
Centrex chief executive Ben Hammond said of Mr Deng’s conviction: “It’s not exactly an isolated thing in China”.
Mr Hammond said he had dealt with the next level of management down from Mr Deng.
“We weren’t aware of anything and it wasn’t to do with Centrex.”
Mining industry veteran Philip Kirchlechner, who ran Rio Tinto’s Shanghai office before Stern Hu, said corruption based on “family-and-friend circles” was “quite common in China”, where government officials had so much power.
It is a complex system of mutual obligation. Corruption is not straightforward.
“It is a complex system of mutual obligation. Corruption is not straightforward.”
He warned Australian companies not to be complacent in their business dealings in China, and said it appeared many Australian companies had forgotten the Stern Hu case – he was sentenced to 10 years for bribery and stealing commercial secrets, amid a bitter price war between China’s steel mills and overseas iron ore miners.
“Australian companies are probably not aware enough of the reality in China..”
A director of Iron Ore Research, Mr Kirchlechner said he had met Mr Deng, and it was hard to know what is really happening in Chinese corruption cases. “It could be he stepped on someone’s toes,” he said.
The corruption case against Mr Deng could also signal the Chinese government was trying to reform the steel sector and clean it up, in the way it had reformed the coal industry, he said.
Wuhan, with more than 100,000 employees, was one of the oldest state-owned companies. The Chinese government wants to merge it with Baosteel, a more efficient steelmaker. The merger was announced a month after Mr Deng resigned as chairman in 2015.
Iron ore exports worth $38.7 billion dominate Australia’s trade with China, accounting for more than half of all exports to China last year.
By Kirsty Needham
Sydney Morning Herald