An Australian executive from Rio Tinto, one of the world's biggest mining companies, is being held by Chinese officials on suspicion of stealing state secrets and could be charged with espionage, an Australian government official said Wednesday. Chinese authorities declined to comment on Wednesday. Australia's foreign affairs minister, Stephen Smith, said at a news conference on Wednesday that the executive, Stern Hu, an Australian citizen and general manager of Rio Tinto iron ore business in China, could face espionage charges. He said three other Rio Tinto employees detained Sunday in Shanghai were Chinese citizens, who are more vulnerable to severe penalties, including the death penalty. In a statement on Wednesday, Rio Tinto, an Australian-British company, said: 'We have been advised by the Australian government of this surprising allegation. We are not aware of any evidence that would support such an investigation.' Smith said he did not believe that the case was related to commercial matters, or to Rio Tinto's decision last month to scrap a planned $19.5 billion investment in the mining company by Chinalco, a state-owned Chinese company. But analysts called the timing of the case peculiar; friction has been growing between officials in China and Australia over huge investments China has sought to make this year in Australian mining and resource companies. And Chinese steel mills are negotiating tensely with Australian iron ore producers, led by Rio Tinto, to seek price reductions. 'This could cast a chill over the business environment in China,' John Frankenstein, an associate professor of economics at Brooklyn College and a specialist in China trade, said Wednesday. 'People may say: 'Do we really want to get involved in high-stakes negotiations where China's national interests are involved? If things don't go right, people might retaliate.'' The scrapped Chinalco -Rio Tinto deal, which would have effectively expanded Chinalco's stake in Rio to 18.5 percent from 9.3 percent, drew stiff political opposition in Australia, where mineral riches have fueled prosperity and some residents have begun to fear China's regional power. Charges and countercharges of espionage between China and Australia have further turned public opinion in both countries against the deal. Last April, Australian newspaper articles said Chinese intelligence agents tried to hack into Prime Minister Kevin Rudd's phone and e-mail when he was in Beijing for the Olympics in August, creating an uproar among Australian politicians and leading to calls for greater communications security. The news reports, citing unidentified Australian intelligence agents as a source, also said agents working for China had tried to hack into systems run by Rio Tinto. China denied the reports, Rudd played them down in his comments, and the Australian government never released a statement confirming them. After the Chinalco deal fell apart, Rio Tinto raised money through existing shareholders and a joint venture with BHP Billiton, another Anglo-Australian mining giant. Chinese officials then complained that Rio Tinto and BHP Billiton could have near-monopoly power in some resources and that China could oppose the deal on antitrust terms. On the Web site of Xinhua, China's official news agency, Shanghai Securities News reported Wednesday that the case could also involve commercial bribery. 