Chinese government sources say President Hu Jintao personally endorsed the Ministry of State Security investigation into Rio Tinto that led to the detention of Australian iron ore executive Stern Hu and three staff.
The investigation appears to be part of a big realignment of how China manages its economy, with spy and security agencies promoted to top strategy-making bodies, Fairfax newspapers say.
The sources, who say they are familiar with details of the Rio Tinto case that have not been made public, say the inquiry began before Rio Tinto broke off its $US19.5 billion ($A24.89 billion) investment deal with Chinalco and joined iron ore production forces with BHP Billiton on June 5.
"This is certainly not 'revenge' for the Chinalco deal not going through," Fairfax quoted a Chinese government source as saying. "It is part of a considered, all-of-government response to the general resources question that was made after considering the likely international response."
The Australian government declined to comment on Sunday night on the revelation that President Hu had endorsed Mr Hu's arrest, Fairfax says.
Australian officials in Canberra and Beijing will seek more details from Chinese authorities on Monday about the circumstances of his arrest eight days ago. He is accused of bribery and undermining China's economic security.
The elevation of Chinese economic policy to a top national security concern began late last year with the collapse of the Shanghai and Shenzhen sharemarkets, the weakening of the real estate market and difficulties with manufacturing exports in coastal regions.
Meanwhile, The Australian says reports have emerged that Rio Tinto was seeking as much as $9 billion in compensation for breach of contracts from Chinese steel mills.
The paper says it's now clear that the allegations against Mr Hu and his colleagues are directly related to prolonged and unresolved negotiations over benchmark prices for iron ore being sold by Australian miners to Chinese steel mills.
Chinese media reports said Rio - and possibly its one-time rival and new joint venture partner BHP Billiton - had been approaching Chinese steel mills in the past month, seeking compensation for broken contracts after the steel makers allegedly reneged on promises to buy certain volumes of iron ore.
"From the middle of June, Rio visited Chinese mills one by one, asking for compensation for contracts which were not fulfilled due to the financial crisis," China's 21st Century Business Herald quoted an unnamed senior steel executive as saying.
"Rio calculated that they lost $5 billion in iron ore and $4 billion in shipments in the previous eight months due to the fact that Chinese mills postponed or even cancelled ships."
A Rio spokesperson declined to comment, The Australian says.
The 21st Century Business Herald reported that the evidence against Mr Hu included "an interior meeting memorandum provided by China Iron and Steel Association personnel".
Another source revealed that a senior executive at state-owned Shougong Steel, Tan Yixin, provided production information to Mr Hu.
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