BHP Billiton has admitted that its relationship with China, which is its biggest customer, had at times been strained, but said that Beijing realised that it had to “play with the big boys”.

Don Argus, the mining group’s outgoing chairman, said that China, which had been resisting a $116 billion (£70 billion) iron ore joint venture between BHP Billiton and its rival Rio Tinto, needed to get over any hostility.

Mr Argus said: “I don’t know what creates the hostility. I can remember in 2005 people were hostile when we increased the iron ore prices 70 per cent. If you’re going to play in this game, then you’ve got to play with the big boys — and they know that.”

China has been concerned that BHP’s proposed tie-up with Rio, which was announced in June, will undermine its position in negotiations over the price of iron ore, which is a key raw material for its resource-hungry economy.

Mr Argus said that plans for the joint venture were on course, despite speculation that the deal might be difficult to pull off. He said: “As far as I know we’re still on track. We’re all still working closely together. The shareholders want this transaction to go ahead because they can see the benefits there at the end,” he said.

He added that BHP’s operations in China were continuing normally, despite diplomatic tensions between Australia and Beijing after the arrest of four Rio staff in Shanghai on allegations of commercial spying.

Earlier this month, BHP and Rio jettisoned a joint plan to market a share of their combined production in a move that was widely interpreted as an effort to quell Chinese concerns about the companies having undue influence over the global iron ore market.

Speaking in the run-up to the UN climate change meeting in Copenhagen, Mr Argus, who is due to retire next year after ten years as chairman, also said that it was critical for policymakers to establish greater certainty over carbon pricing.

BHP Billiton’s costs will increase under an Australian plan to trim emissions, which, from 2011, will require the country’s top polluters to pay for emission permits.

Mr Argus said: “As I focus on the real objective — and this is to decrease the amount of CO2 going into the atmosphere — certainty of carbon pricing is extremely important.”

The outgoing chairman will be replaced by Jacques Nasser, the former chief executive of Ford.

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