Q+A-How will Rio case impact foreign business in China?

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SYDNEY, July 10 (Reuters) - China has shaken global commodities and currency markets and sent a tremor through its relations with Australia by detaining a senior Australian mining executive and three of his subordinates on spying allegations [ID:nSP464661].

The detentions of the four employees of global miner Rio Tinto (RIO.AX) (RIO.L), including its top iron ore salesman in China, has raised some major questions about the implications of this affair for doing business in China and the iron ore trade.

DOES THE CASE REALLY THREATEN AUSTRALIA-CHINA RELATIONS?

It could. Relations were already strained before this week's detentions, largely thanks to last month's spectacular failure of a proposed $19.5 billion Chinese investment in Rio Tinto, which would have been Beijing's largest offshore deal.

Australia's foreign minister said on Friday that Canberra was still pursuing a free-trade deal with China, its biggest partner with about US$53 billion in two-way trade, but he conceded that the affair had further heightened bilateral tensions.

China buys about 15 percent of Australian exports and supplies about 16 percent of Australian imports, so Canberra's diplomatic options in the face of such economic muscle appear limited. It is no wonder that Australia's Mandarin-speaking prime minister, Kevin Rudd, is calling for cool heads to prevail.

Canberra wants the best price for its resource exports but it also has its eye on the bigger prize of a free-trade deal. In 2005, it estimated that such a deal would add as much as US$18 billion to gross domestic product over 10 years to 2015 -- though the same calculation gave China a bigger gain of US$64 billion.

HOW DOES IT AFFECT THE IRON ORE TRADE?