BHP Billiton CEO harboured concern over China spying

Global miner BHP Billiton's boss, Marius Kloppers, confirmed on Wednesday he had harboured concerns about Chinese and competitor espionage on his business, citing it as a reason behind his push for market pricing of key commodities.

Kloppers, who runs the world's biggest miner, once offered to trade intelligence on China with Washington after telling a U.S. diplomat about the extent of Chinese surveillance of his firm, an Australian newspaper said this week.

The Sydney Morning Herald, citing diplomatic cables obtained from WikiLeaks, said Kloppers had confessed his concerns to the Australia-based envoy in 2009, at a time when he was pushing Chinese customers to switch from closed-door annual price negotiations to more market-based pricing.

Asked on Wednesday to confirm whether he was concerned about espionage from China and from competitors such as rival miner Rio Tinto , Kloppers told an earnings briefing: I would rather like to put that in a positive.

One of the reasons we have pushed so hard for market-clearing prices is so that these sorts of things are not a concern, because if you sell your product at the market-clearing price, that everybody can read off screens, it minimises any impact of differential information that the one party or the other may hold, he said.

So you produce at full capacity and you sell at the market price and you should, from those comments, really understand why we have pushed so hard to get the market-clearing price.

Kloppers led a successful battle over the past two years to move pricing of iron ore sales away from annual negotiations, despite resistance from Chinese steel mills which buy more than $25 billion of the raw material a year from Australia alone.

Negotiators involved in the annual talks -- a system now replace by quarterly market-based pricing -- relied heavily on good industry intelligence to strike the best annual bargain, and the negotiations were often tense and full of intrigue.

Tensions peaked in 2009 when Chinese steel producers failed to clinch an annual pricing deal and a Shanghai court jailed four Rio Tinto employees, including Australian citizen Stern Hu, for stealing commercial secrets and taking bribes.

The arrest of Hu and three Chinese colleagues at the height of fraught iron ore price negotiations strained ties between Australia and China, and shocked the Chinese steel industry.

Experts say the absence of dividing lines between the state and corporations in countries such as China, coupled with digital technology that can make it easy to steal huge volumes of information, increases the risks companies face.

Last month, French President Nicolas Sarkozy's office asked French intelligence to probe suspected industrial espionage at car giant Renault with a possible Chinese link, a government source told Reuters. China denies involvement .

Renault is far from the only suspected case. U.S. cables released by WikiLeaks show diplomats blaming China for hacking into Google systems that prompted the Internet giant to pull back from mainland China.

Some analysts also suspect information theft may be helping China close the gap faster than expected as it builds a stealth fighter to rival Lockheed Martin's F-22.