China is the world’s leading steel maker and the biggest importer of iron ore, which is used to make steel. Rio Tinto’s negotiations with China over the price of iron ore help establish a global price for sale of that commodity to China, and price talks were at a delicate stage when security officials detained the four employees on July 5.  Dropping the espionage charge may help defuse the diplomatic and international furor that has built over the past month, experts say. Officials pulled back after weeks of pressure from Australia and growing concern in the international business community about a lack of transparency in the case.  Last month, Australia’s prime minister, Kevin Rudd, cautioned Beijing that the world was watching the case. And during a recent trip to China, Gary Locke, the United States commerce secretary, said that American businessmen had also expressed concern about foreign executives working here.  Top officials and state-run news media had said that security officials had strong evidence of the theft of state secrets in the case. The government also said the four Rio Tinto employees caused “enormous economic losses” to China and its state-controlled steel makers.  For its part, Rio Tinto has strongly denied any wrongdoing, insisting its employees had followed its strict ethics guidelines.  Just last weekend, an article posted on a Web site affiliated with China’s state secrets bureau claimed that Rio’s deceit had cost China $100 billion in losses over six years, even though the value of the country’s iron imports during that time was about $90 billion, according to some analysts.  That Web site was shuttered Monday, and a Chinese official told Dow Jones news agency that no one had been authorized to speak publicly about the case.  The article’s sweeping allegations seem even more puzzling now, analysts say, because it came just days before the government decided not to pursue charges of spying.  Nicholas C. Howson, a professor at the University of Michigan Law School and a China legal specialist, says it is not uncommon for government agencies to release what appear to be contradictory positions, since various departments play to their own constituencies.  “The temptation is for us to look at China as monolithic,” Mr. Howson said. “But there are competing forces.”  He continued, “My sense is that this is the state security bureau running a little amok.”  The turnabout was welcomed by Rio Tinto. Sam Walsh, the company’s chief executive, also said the company was ready for the defense: “From all the information available to us, we continue to believe that our employees have acted properly and ethically in their business dealings in China.”  Some Chinese officials also described the decision on the charges as an important signal. “The Rio Tinto case showed the Chinese government’s resolution to create and maintain a competitive, open and fair market environment in the country,” Fu Ziying, the vice minister of commerce, said Wednesday.  Legal experts say that had the four employees been charged under China’s tough but vague state secrets law, they might have been tried in secrecy, with some evidence withheld even from their own lawyers.  “It doesn’t mean that it won’t come back to state secrets,” said Jerome A. Cohen, a professor of law at New York University. “We don’t know what the final configuration will be. But by not pursuing the state secrets charges, it seems they didn’t want to blow things up at a diplomatic level.”  Many questions remain unanswered in the case, legal experts say. Among them: if China has evidence that Rio Tinto engaged in bribery, why has it yet to bring any charges against the company itself? It is also not clear why the police or prosecutors have yet to take legal action against Chinese individuals or companies that allegedly received bribes in exchange for providing inside information.  Still, legal scholars say the softening of the charges could be a step forward for legal reform.  Mr. Cohen said the case seemed likely to influence current deliberations to revise the country’s state secrets law.  “Often, institutional reforms come from mistakes or accidents,” Mr. Cohen said. “I think it’s likely cases of this nature won’t start out this way again, with all that harsh rhetoric.”  A version of this article appears in print on , on Page A6 of the New York edition with the headline: 4 on Rio Tinto’s China Staff Won’t Face Spying Charge. Order Reprints| Today's Paper|Subscribe
China formally arrested an Australian citizen and three other employees of the mining giant in a case that has created a diplomatic uproar.