So it seems Stern Hu is simply the man who knew too much.

According to the China Daily, he was so knowledgeable about the companies with which he was negotiating iron ore prices he must have obtained that knowledge nefariously. In capitalism such fine research brings a bonus — in China, arrest.

But those expecting a backlash against China over its arrest of four Rio Tinto employees are still waiting (including Kevin Rudd, who warned yesterday that “the world is watching”). The spot price for iron ore is now rising, not falling, and no international petitions for Stern Hu’s release are being taken up by the world’s business leaders.

The world might be watching but it’s keeping its head down. Perhaps that will change as weeks turn into months for the Rio Four, but for the moment it’s business better than usual.

In the past week the Shanghai share index has gone up 3 per cent, Rio’s share price is up 8 per cent and the spot price of iron ore is up 10 per cent.

That’s not to say there is no impact of the Rio arrests on business affairs in China, but it’s hard to see by the numbers.

To cap it off, China’s foreign reserves increased by a record $US178 billion in the second quarter to $US2,132 billion — topping $US2 trillion for the first time — even though the trade surplus has fallen to half what it was a year ago.

So the great unwinding of the global imbalances that led to the crash of 2008 will have to wait. Money is pouring into China at an increasing rate: RGE Monitor’s Rachel Ziemba, writing for the Council on Foreign Relations in New York, estimates that “hot money” inflows in the second quarter were $US60-70 billion, a reversal of $US70 billion in outflows in the first quarter.

Within China there is an explosive credit bubble going on: new bank lending in June was 1.53 trillion yuan ($US224 billion), taking new loans in the first half of 2009 to 7.4 trillion yuan – exactly three times the level in the first half of 2008.

The government is countering the fall in exports by flooding the economy with cash, and speculators are counting on an implicit government guarantee and borrowing more. It’s the ‘Hu Put’ (Hu Jintao, that is, not Stern) — the equivalent of the ‘Greenspan Put’ that underpinned the great US credit boom of the early part of this decade.

None of which is good news for Stern Hu. Money is still pouring in, businesses are still lining up to do business with China and the prisoner’s Prime Minister is ineffectively cajoling behind the scenes.

In fact, Kevin Rudd had better hurry up if he doesn’t want to be the second western leader to raise the plight of the Rio Four directly with the Chinese leadership: US Commerce Secretary, Gary Locke, said overnight that he would raise it with Premier Wen Jiabao on Thursday.