Q+A-Why is China detaining Rio's mining executives?

(For full coverage of the iron ore probe, see [ID:nSP473911])

July 15 (Reuters) - Australia's prime minister Kevin Rudd has raised the stakes over China's detention of an Australian mining executive on suspicion of spying, warning China on Wednesday that the world is watching how it handles the case.

Here are some questions and answers about the latest developments:

WHO IS BEING HELD?

Stern Hu, Rio Tinto's head of iron ore marketing in China, and three other members of the Shanghai-based iron ore team were detained in early July for "stealing state secrets".

Hu, a Chinese-born Australian citizen, was accused of obtaining and passing on the Chinese industry's negotiating position, sources said.

Rio's China team carry out some negotiations and manage operational details of term contracts for iron ore, a key ingredient in steel making, as well as tracking market information.

An iron ore executive from China's eighth-largest mill, Shougang, is also in custody, Chinese media reported. Executives from other big Chinese mills are also being questioned.

WHAT IS SIGNIFICANT ABOUT THE TIMING OF THE ARRESTS?

They came at a sensitive time, as Chinese steel mills had reportedly given in after protracted annual iron ore price negotiations, while their official representative, the China Iron and Steel Association, held out for deeper cuts than those obtained by Japanese and Korean steelmakers.

Traditionally, all steel mills accept whatever deal is settled first between any mill and any of the big three miners, Rio, BHP Billiton (BLT.L)(BHP.AX) and Brazil's Vale (VALE5.SA).

(For a TIMELINE tracing iron ore price negotiations see CHINA IRONORE or [ID:nSP491737])

WHY WERE THE EXECUTIVES DETAINED?

Rio's employees are being held on accusations of stealing state secrets -- a strategically vague phrase which covers the possession or dissemination of a wide array of information deemed sensitive by the authorities.

It's possible that the case is exactly that -- illegally obtaining sensitive information -- but the timing and the targets have also given rise to other explanations.

Some steel industry observers see the developments as an attempt by the steel association, which had vowed to the central government that it would achieve a better deal on iron ore prices, to reassert control and save face after the Chinese mills' reported capitulation.