The heavy sentences for bribery and industrial espionage serve as a warning for firms wading into treacherous waters in the emerging giant, where "guanxi" (connections) are vital, sharp practice is common and laws ill-defined.

"It's extremely rare to not engage in some level of activity which is slightly dubious," said John Lee, a fellow of the Centre for Independent Studies think-tank.

Australian citizen Stern Hu and three Chinese colleagues were jailed for between seven and 14 years on Monday after a three-day trial in Shanghai, much of it held behind closed doors.

They were arrested last July during failed talks to set annual prices for iron ore, a core ingredient of the steel that is building the country's industrial revolution.

While only limited details of their crimes are known, media reports have revealed an environment where deals are smoothed with gifts and unscrupulous traders overcharge steel mills for ore, sharing the spoils with insiders.

"It shows the difficulty of knowing what limitations there are on your actions in order to find out what information you might need," said David Martin Jones, an Asia expert from Australia's Queensland University.

In China's business culture, that "might entail a bit of taking people out for lunch and slipping a few brown paper envelopes under the table".

And as Australian Foreign Minister Stephen Smith has made clear, the lack of transparency in the Rio trial also leaves foreign companies unsure on where China draws the line on what constitutes trade secrets.

According to Martin Jones, the case of Hu, a father-of-two who was born and educated in China, will serve as a "cautionary tale" for businesses hoping to take advantage of the country's economic rise.

"I think (other companies) will be very careful about the advice they're giving to people who are negotiating for them in China and get them to play it strictly by the rules," he said.

"The rules of the game don't seem to apply in an Anglo, Australian or American economic framework. On the other hand there's big money to be made so it's kind of a cost-benefit analysis."

Experts say similar calculations are being made in boardrooms of Western companies which will now take a closer look at their operations in China.

"The dilemma is you need cooperation and support from local (communist) party officials to do business, because local officials tend to have a lot of control," said Lee.

"On the other hand, as the Stern Hu case shows, if you fall foul of these officials they can use the law to prosecute you for corrupt activities and that just increases the personal and legal risk for companies.

"Unfortunately there's just no way of getting round that because that's the way that business is done."

China's rampant growth is now propping up the flagging world economy, accelerating the collision course between its institutions and Western standards for business and justice.

The timing of the arrests -- as the iron ore contract talks collapsed, and just weeks after Rio snubbed a major Chinese investment -- caused concern, as well as the brief, part-closed trial.

"The Chinese authorities might have known he (Stern Hu) was acting close to the line and they were prepared to let it go as long as there was a deal with Rio Tinto on the table," said Martin Jones.

"As soon as that collapsed they decided to enforce the rules very rigidly."

Deakin University analyst Damien Kingsbury said Rio, which signed a 1.4 billion US dollar deal with China just days before the trial, seemed to have struck a pact with Chinese authorities.

Ahead of the verdict, Rio said it respected China's judicial process. Afterwards, it disowned the four convicted employees.

"What that tells you is that individuals don't count for much at that level of business, but also that probably a deal has been done," Kingsbury said.

He said there was only one way to avoid trouble in a country where some 45 million local, and often unaccountable, party officials control the operating environment.

"Make sure you're squeaky clean ... and try not to annoy the government too much."

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