Sydney  - The failure of a Chinese state-owned company to up its stake in the giant miner Rio Tinto Ltd is set to test relations between China and Australia.

"Obviously, China is disappointed," Australian Resources Minister Martin Ferguson said Friday. "You can expect some angst, but I actually believe that we'll return to a normal commercial alliance in a very short period."

Ferguson spoke after the failure of Aluminum Corporation of China (Chinalco) to double its stake to 18 per cent in diversified miner Rio Tinto.

Rio spurned Chinalco, opting instead to splice its iron-ore operations in Western Australia with those of archrival BHP Billiton Ltd.

Chinalco's 19.5-billion-US-dollar pitch for a larger holding in Rio represented the biggest foreign investment China had ever proposed.

After that bid failed, China argued the resulting 50-50 joint venture would concentrate too much market power in the hands of the world's top two resources companies. The China Iron and Steel Association also criticized the joint venture's "strong monopolistic tint."

"From time to time, there's going to be argy-bargy about foreign investment considerations," Ferguson said. "China has got to understand that the arrangement between BHP and Rio is a commercial outcome."

The price point in iron-ore-export contracts is set annually, and China is under pressure to accept the same quantum as Japan and South Korea. China has argued for a 60-per-cent cut on last year's fix - not the 37-per-cent discount to which other customers have agreed. (dpa)