China president Hu endorsed Rio arrests: report

CANBERRA (Reuters) - China's President Hu Jintao personally endorsed an investigation into global miner Rio Tinto that led to the detention of four of its China-based staff, a newspaper said on Monday, citing Chinese government sources.

The investigation appears to be part of a realignment of how China managed its economy in the wake of the global financial crisis, with spy and security agencies promoted to top strategy-making bodies, the Sydney Morning Herald newspaper said. The detention a week ago of Anglo-Australian miner Rio Tinto's top iron ore salesman in China, Australian Stern Hu, and three of his Chinese subordinates has cast a shadow over Australia-China relations and unnerved the iron ore trade.

Rio Tinto is the world's second largest iron ore miner and was locked in intense price negotiations with China when Hu and the three others were detained in Shanghai, accused of stealing state secrets and bribing Chinese steelmakers for information.

Australia's Foreign Minister Stephen Smith said on Sunday he was urging Chinese authorities to handle the case expeditiously, and to consider the wider risks for international business confidence.

The nine-member standing committee of China's Communist Party, led by President Hu, had taken more control over economic decisions at the expense of the State Council, led by Premier Wen Jiabao, the Herald said, quoting anonymous Chinese economic advisers.

The inquiry began before Rio Tinto broke off its $19.5 billion investment deal with Chinese metals firm Chinalco and instead formed an iron ore joint venture with rival BHP Billiton on June 5, the sources told the paper.

"This is certainly not revenge for the Chinalco deal not going through," the Herald quoted one Chinese government source as saying.

The collapse of the Chinalco deal was immediately followed by the establishment of a high-level, all-of-government group that would assess the political and economic risks of large overseas investment deals, the paper said.

The outbound investment assessment group, which features vice-minister level representatives of security agencies, is yet to be given a name and no details have been made public, it said. (Reporting by Rob Taylor; Editing by Mark Bendeich)