Four Rio Tinto employees, including a Shanghai-based Australian in charge of the company's Chinese iron ore business, were detained on July 5 while Rio Tinto was acting as lead negotiator for global iron ore suppliers in price talks with Chinese steel mills.

According to China's state media , the four were accused of bribing employees of Chinese steel companies to obtain confidential information on China's negotiating strategy.

Strained ties

The Rio Tinto incident has strained relations between Australia and one of its largest trading partners, in which Rio Tinto plays a key role as a major supplier of iron ore and other raw materials to China's growing economy.

"We are firmly opposed to anyone stirring up the case and interfering with China's independent judicial authorities"

Qin Gang, China foreign ministry spokesman

Kevin Rudd, the Australian prime minister, on Wednesday warned that China had "significant" business interests on the line and cautioned that foreign governments and international companies were closely watching developments in the Rio Tinto case.

Rudd said his government has yet to receive information directly from Chinese authorities about why the company's Australian executive, Chinese-born Stern Hu, was detained.

But Chinese officials responded by criticising Australia for making "noise" about the case, saying that any interference was "not in the interest of Australia".

"This is interference in the judicial sovereignty of China. This cannot change the effect and cannot manoeuvre the legal dealings of the case by Chinese authorities," Qin Gang, a Chinese foreign ministry official, said.

"We attach great importance to the stable development of economic and trade relations, but we are firmly opposed to anyone stirring up the case and interfering with China's independent judicial authorities."

Price war

Rio Tinto is a major supplier of iron ore to China's steel industries [Reuters]
China's Herald, citing an unidentified member of China's negotiating team, said the Chinese are talking with Brazil's Vale about prices because "there is no one at Rio [Tinto] that we can talk to".

The iron ore talks have failed to produce an agreement on prices for the buying year that began July 1.

The Chinese government considers information about steel production, sales and iron ore costs to be secret, according to state media.

Chinese news reports also said that executives of at least five major Chinese steel producers and the industry association are also under investigation.

China's booming steel industry consumes up to 60 per cent of global iron ore production and Beijing is pressing for deep price cuts after two years of increases totalling more than 120 per cent.