A Chinese court has sentenced Australian Rio Tinto executive Stern Hu to 10 years in prison for corruption and industrial espionage.

Hu and three Chinese staff, who were tried last week in Shanghai, were convicted of accepting bribes totalling about $14 million and stealing trade secrets.

Hu, the head of the Anglo-Australian miner’s Shanghai office, was sentenced to 10 years in prison.

His Chinese colleagues – Wang Yong, Ge Minqiang and Liu Caikui – were given jail terms of 14, eight and seven years, respectively.

Australian Foreign Minister Stephen Smith described the penalty handed to Hu as “tough”.

“Whilst we don’t condone bribery in any way, I think the sentence by any measure is harsh,” he said.

“It’s a tough sentence by Australian standards. I’m advised that so far as Chinese sentencing practice is concerned, it is within the ambit or within the range.”

But he says the case will not affect relations between the two countries.

“Whilst this has been a very sensitive, a very important and very difficult consular case, I don’t believe that what’s occurred today will have an adverse impact on our own relationship. We continue to have a strong economic and broader relationship with China,” he said.

Mr Smith says it is too early to tell if Hu will be allowed to serve some of his sentence in Australia.

Australia and China have drawn up a prisoner transfer agreement, but it is yet to be ratified.

Mr Smith says until an agreement is signed it is unclear whether Hu would be eligible to be transferred, or if he would even want to return to Australia.

“He may or may not want to engage in such a possible transfer depending upon his family and his family circumstances.” he said.

In a statement, Rio Tinto said it would terminate the employment of the four staff members.

“We have been informed of the clear evidence presented in court that showed beyond doubt that the four convicted employees accepted bribes,” Rio Tinto Iron Ore chief Sam Walsh said.

“By doing this they engaged in deplorable behaviour that is totally at odds with our strong ethical culture.

“In accordance with our policies we will terminate their employment.”

The judge presiding over the case, Liu Xin, said the four men had seriously damaged the competitive interests of Chinese steel companies.

He said their actions forced Chinese steel companies into an unfavourable position in price negotiations and this led to the collapse in iron ore price negotiations in 2009.

But the judge’s harshest comments related to their obtaining the commercial secrets of Chinese steel companies for the benefit of Rio Tinto.

He said they were given documents which were then emailed to senior Rio Tinto managers. He said this seriously damaged Chinese steel companies. which lost significant amounts of money to Rio Tinto.

The four defendants stood quietly throughout the sentencing.

Most of the proceedings of the trial were held behind closed doors and Australian diplomats were excluded from the hearings on the commercial secrets allegations.

Foreign reporters were allowed to watch the verdict hearing on closed-circuit television from a separate room.

Mr Smith said he was disappointed the court would not allow Australian officials access to the part of the trial dealing with commercial secrets.

“Serious unanswered questions [remain about] that part of the trial and that matter as far as Stern Hu is concerned, but also more generally and more widely the Australian business community and international business community,” he said.

“I think here China has missed a substantial opportunity. This was an opportunity for China to bring some clarity to the notion of commercial secrets.”

Implications for business

Opposition Foreign Affairs spokeswoman Julie Bishop, who expressed surprise at the length of Hu’s sentence, said the case would have major implications for Australian businesses operating in China.

“This is an issue of great concern to many companies from Australia and also from around the world doing business in China,” she said.

“The fact that there is very little detail available as to what constitutes a commercial secret and whether one could be in breach of Chinese laws will continue to create uncertainty for those doing business in China.”

Dr Malcolm Cook, East-Asia director at the Lowy Institute, said the verdict might make business more cautious about having major sensitive negotiations in China.

“The benchmark iron ore negotiations that were in Shanghai last year, at which time Stern Hu was arrested, this year are taking place outside China despite China being the largest buyer,” he told Reuters.

World watching

Prime Minister Kevin Rudd had said the world was watching the trial, which was widely seen as a test of the rule of law in China and sparked concerns about doing business in the world’s third-largest economy.

The four had pleaded guilty to taking money, and one had admitted to commercial espionage, but the accused had disputed aspects of the charges, their lawyers said.

A prosecutor had recommended that Hu be given a lenient sentence after he apologised to the court and to Rio, saying he took about $870,000 to help childhood friends in need, his lawyer Jin Chunqing said.

The four Rio employees were arrested last July during contentious iron-ore contract talks between top mining companies and the steel industry in China, the world’s largest consumer of the raw material. The talks collapsed.

A posting outside the Shanghai courthouse said Tan Yixin, an executive at China’s eighth-largest steel mill Shougang Corp who was detained last year after the Rio arrests, would appear in court later.

The notice gave no further details about the hearing.

At the three-day trial of the Rio employees, the court heard evidence that millions of yuan in bribes had been stuffed into bags and boxes for the accused, according to state media.

Hu took money from small private steel companies, which before the global financial crisis were locked out of buying iron ore from Rio because the mining giant prioritised large state-run steel companies, Mr Jin said.

Wang strongly objected to the bribery allegations, saying he simply borrowed the money from one of China’s richest men, Du Shuanghua, the National Business Daily reported.

Mr Du, the former head of Shandong-based Rizhao Iron and Steel group, has contradicted Wang’s account, saying he paid the Rio employee millions of dollars for preferential treatment, the newspaper said.