And in an ideological breakthrough, the country's leaders have recognised for the first time that markets, not governments, determine price in the sector after the collapse of the 40-year-old annual benchmark system to set iron ore prices this year.

At a government level, China's overriding concern with the new tax appears to be the price of iron ore rather than any concern over returns on its billions of dollars of investments in Australian mining companies.

"I was very clear that this tax would not impact on price; it's a tax on profits and not on consumption and that it is a competitive global market," Mr Crean told The Australian . He discussed the issue with China's top economic ministry, the National Development and Reform Commission, on Monday during a visit to China.

"Importantly in price they acknowledged upfront, for the first time, that it was the market that had to determine the prices," he said. "I think that is an important acceptance, whereas previously they kept urging the government to intervene."

Chinese steel mills are beginning to strike quarterly contracts based on market spot prices, which for iron ore rose to near record highs last month before falling again in the past week.

Mr Crean said the message he had consistently conveyed, that China was recognised as a market economy and so should act like one, had registered.

According to Mr Crean, the NDRC did not mention investment "at all" as a potential issue with the tax, despite some Chinese companies expressing reservations in the local press and The Australian learning of several projects that had been put on hold.

"They (the NDRC) were very interested in my argument that it would be a tax that would increase production by increasing supply by encouraging investment."

Mr Crean also stressed that the country's businesses - most of which in the mining and steel sector are state owned - rather than its government, had been invited to make submissions to the government's consultative panel on the tax.

"I have invited them, just like we have invited any other company that has concerns, or is associated with, the tax -- that is what the panel exists for," he said.

"I reminded them that whilst we were committed to introducing the new tax, there were worries about implementation and transition and if there were issues that they wanted to raise in that context, they should feel free to avail themselves of the process."

Sourced from www.theaustralian.com.au