REUTERS - Chinese prosecutors have formally arrested four employees of Anglo-Australian mining giant Rio Tinto on suspicion of obtaining commercial secrets and bribery, the official Xinhua news agency reported on Wednesday.
Australian Stern Hu and three Chinese staff of the world's second-biggest iron ore producer are suspected of "using improper means to obtain commercial secrets about our country's steel businesses", Xinhua cited prosecutors in Shanghai as saying.
The report said the procuratorate, or state prosecutors, also approved their arrest on suspicion of "commercial bribery", a charge that can bring jail terms of up to 3 years, or 7 years in "especially serious" cases.
It did not mention accusations of stealing state secrets, a sweeping charge raised in earlier reports, which can attract tougher sentences.
"The procuratoratial organ conducted investigations and believes that it has evidence for suspecting the four, including Stern Hu, of the above crimes," said the Xinhua report.
Hu, Rio Tinto's head of iron ore marketing in China, and the three other members of the Shanghai-based team were detained on July 5. Hu was accused of obtaining and passing on the Chinese steel industry's negotiating position in protracted iron ore price talks, sources have said. Iron ore is used to make steel.
The Rio case has cast a shadow over Australia-China trade, worth $53 billion in two-way terms in 2008.
The arrests do not amount to a decision to go trial but allow authorities to continue investigating, said Mo Shaoping, a prominent criminal lawyer in Beijing.
"The arrest means the suspects remain in detention and the police can continue investigations, usually for up to two more months," Mo told Reuters.
"It's not the conclusion of the investigation process, and it doesn't necessarily mean a trial is imminent."
Rio Tinto's shares have fallen about 5 percent from their close at the end of last week of A$60.57, before a weekend report from China that said the company had been spying for six years.
The shares stood at A$57.35 at 0041 GMT on Wednesday.
BHP Billiton has fallen about 1.3 percent to A$37.50 over the same period and the benchmark Australian S&P/ASX 200 index has risen about 0.6 percent.
No comment from Rio
Rio Tinto declined to comment when contacted by Reuters about the arrests. Rio has previously said the four did nothing wrong.
Australia's government had not been informed of the arrests, a Foreign Ministry spokeswoman said.
Prime Minister Kevin Rudd has warned China it had significant economic interests at stake in detaining Hu and that the world was watching how it handled a case that has highlighted the risks of doing business in the world's third-largest economy.
However, Australia has insisted the case would not harm trade relations with its biggest trade partner.
Australia exported $15 billion worth of iron ore to China in 2008, accounting for 41 percent of China's iron ore imports in that period.
The Xinhua report also said that in recent days Chinese steel executives had been formally arrested on suspicion of "providing commercial secrets" to Hu.
An online article published in a magazine run by China's state secrets agency at the weekend said Rio spied on Chinese mills for six years, resulting in the mills overpaying $102 billion for iron ore, Rio Tinto's biggest earner.
The figure of $102 billion appeared to derive from an academic assessment of how much more the steel industry has paid for iron ore since 2003, but that higher cost was more than offset by rising steel prices as China's economy grew.
The Australian government on Tuesday dismissed the Chinese report accusing Rio of overcharging and spying on Chinese steel mills, saying the report had not been officially sanctioned.