The diplomatic row sparked by China’s detention of four Rio Tinto employees grew last night when Beijing accused the Anglo-Australian mining company of bribing the entire Chinese steel industry.

The state-owned China Daily newspaper quoted an unnamed “industry insider” claiming that Rio bribed each of the 16 Chinese steel companies involved in this year’s negotiations to set the benchmark iron ore price.

Publication of the article came hours after Kevin Rudd, Australia’s Prime Minister, hardened his stance on the detention of the Rio workers.

Stern Hu, an Australian mining executive for Rio, and three Chinese colleagues were detained by China’s State Security Bureau in Shanghai on July 5. China has not disclosed the specific allegations against Mr Hu, but says that it can prove that he is guilty of stealing state secrets and of causing huge economic loss to the country.

Mr Rudd joined the fray yesterday, warning China that it had significant interests at stake in detaining Mr Hu on spying charges and that the world was watching how it handled the case.

Mr Rudd said that Australia had huge economic interests in China, but warned that the relationship was two-way. “I remind our Chinese friends that China, too, has significant economic interests at stake in its relationship with Australia and with its other commercial partners around the world,” he said. “A range of foreign governments and corporations will be watching this case with interest and they will be drawing their own conclusions as to how it is conducted.”

A background factor in the dispute had earlier appeared to have abated after industry sources said that Rio and BHP Billiton, its mining peer, had secured tacit agreement with Chinese steel mills for a 33 per cent cut in the price of iron ore, the same deal agreed with other Asian customers in May. The Chinese had wanted a bigger reduction in price.

Fears for the four grew, however, when a former chairman of Sinopec, the Chinese state-owned oil refiner, was yesterday handed a suspended death sentence for taking bribes. The sentence on Chen Tonghai is among the harshest penalties to be imposed on a senior official of a state company in recent years and shows China’s determination to tackle rampant corruption, a source of much popular discontent.

Chen, 61, held a rank equivalent to a cabinet minister before being abruptly removed from Sinopec’s helm two years ago. He was convicted of accepting 185.7 million yuan (£17.7 million) in bribes while at the refiner from 1999 to 2007.

The Beijing No 2 People’s Intermediate Court said that Chen’s remorse had allowed it to order a two-year reprieve on his death sentence, which means that it will be commuted to life in prison if he commits no further crime while in jail. The court said: “Chen took an extremely large amount of bribes, severe enough for a death sentence ... But as he confessed and repented, provided tips about other people’s criminal acts and returned all the bribes, a reprieve was granted.”

The court said that its sentence should serve as a warning to other officials tempted to abuse their powers for profit.

Chen, head of a huge refiner that supplies nearly half the needs of the world’s second-largest oil market, was placed under investigation in May 2007. He was formally detained at Beijing airport while trying to flee China the following month.

Global reach

• Sinopec is a subsidiary of China Petrochemical Corporation, the largest oil refiner in Asia. It is China’s second-largest oil company, after PetroChina Sinopec made its debut on the Hong Kong, New York and London stock exchanges on October 18, 2000. It listed on the Shanghai stock exchange on July 16, 2001. Last month Sinopec bought Addax Petroleum, the oil explorer, for $7.2 billion (£4.4 billion), the largest Chinese offshore acquisition.

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