China's skirmish with Rio Tinto has escalated into an all-out war.

First, the Anglo-Australian mining giant ruffled China's feathers in June by scrapping a tie-up with China's Chinalco. The Chinese miner was to pay $19.5 billion to buy Rio Tinto's iron ore, copper and other assets, along with convertible bonds. Instead, Rio infuriated China by abruptly scrapping the Chinalco deal and tying up with archrival BHP Billiton.

In early July, the deadline came and went during Rio Tinto's negotiations with a group of Chinese steelmakers for setting a benchmark price for iron ore purchases. Rio refused to reduce prices as much as China demanded, leaving China to pay higher spot prices for ore.

Days later, China detained four Rio Tinto employees in Shanghai and accused them of stealing state secrets.

And over the weekend, Chinese state media claimed that Rio's espionage had cost China 700 billion yuan ($102.4 billion) by allowing Rio Tinto to manipulate the prices China paid for iron ore over at least six years.

Chinese state media directly affiliated with the State Secrets Bureau laid out the extraordinary accusations on a Chinese Web site on Saturday. The article said Rio Tinto had spied on China's classified steel industry information for as long as six years and urged China to take action to tighten its control of commercial information, signaling that more commercial espionage may soon be exposed.

The article has since been removed from the site following the attention it received worldwide.

While Chinese media have been suggesting for some weeks that industrial espionage in the steel industry is widespread and longstanding, in his article, Jiang Ruqin, the former director of the Huai'an State Secrets Bureau in Jiangsu Province, urged the central authorities to deploy more staff to enforce China's existing state secrets laws to protect sensitive commercial information from leaking out and tarnishing China's national interests.

In the past, Chinese state secrets laws have been used to punish human rights activists, lawyers and others China views as political threats.

In the light of the recent Rio Tinto case, Jiang said, China must immediately define clearly what sort of commercial data constitutes a state secret amid rising commercial disputes and battles with China's trading partners.

The article was published on baomi.org (China Secrecy Online), the Web site run by a state-level publishing house that has been printing national-security-related books and magazines. In it, the former intelligence and security head alleged Rio Tinto had used bribery and spying to collect a massive amount of information over the past six years, based on evidence found in a database on Rio Tinto's computers.

Jiang claimed that Rio Tinto had used the information to force the Chinese steel sector to pay $700 billion yuan more than the fair value of iron ore imported over the past six years. The excess amount is about double the total profit within the Chinese steel sector during the same period. "It was like China had given the boss of these commercial spies a gift of $100 billion, approximately 10% of Australia's GDP!" Jiang said.

The report marks the latest episode in the Sino-Australian iron ore trade drama that has poisoned relations between the two nations since early July, when four Rio Tinto employees based in Shanghai, including Chinese-born Australian executive Stern Hu, were detained by China's Public Security Bureau on charges of bribing Chinese steel mill executives for sensitive price information during the iron ore contract negotiations between the China Iron & Steel Association and the Anglo-Australian miner.

Jiang stressed that the Rio Tinto case highlights how urgent it is for China to step up its surveillance on foreign trade representatives and how crucial it is for Chinese state-owned enterprises executives to safeguard commercial secrets.

He added that the Chinese watchdog has been short-staffed and focused purely on government organization for political and military security, leaving a loophole for foreign commercial spies and domestic traitors inside state-owned enterprises to take advantage. Jiang said that since 1997 economic intelligence has been within the purview of China's National Secrets Protection Law.

China Daily also reported Monday that Rio Tinto staff had been bribing Chinese steel mill executives participating in iron ore price talks for years, so much so that the practice had become an unwritten market ritual.

China Daily quoted an unnamed senior director of a large Chinese steel company as saying: "The whole industry connived and winked at each other; that's why bribery existed for many years but was only revealed now."

Wenweipo, a pro-Beijing newspaper in Hong Kong, said Monday that Stern Hu, who is still being detained by the authorities, had also allegedly received a considerable amount in bribes from small and medium-sized steel mills for helping them obtain more import quotas from large Chinese steel giants. Citing unnamed sources, the Hong Kong paper said Hu owns several multimillion-dollar houses in luxury resorts in China.

More on this topic: The Deeper Level Of The China-Rio Affair

Latest Updates: Beijing formally charges four Rio Tinto employees