China has cleared Rio Tinto and the Australian government of blame for the collapse of a $19.5 billion tie-up between Chinalco and Rio Tinto last June, an Australian newspaper reported from Beijing on Monday.

Chinalco had agreed on a $19.5 billion equity and asset tie-up with Rio Tinto last February, which the Anglo Australian miner abruptly called off in June when it decided instead to raise money through a rights offer and form an iron ore joint venture with BHP Billiton .

The collapse of the deal soured relations between Australia and China and a month later China arrested four Shanghai-based Rio Tinto staff, including Australian citizen Stern Hu, on allegations of spying and bribery, deepening the rift.

The post-mortem's conclusions suggest that the arrest of Hu and the other three staff did not come in revenge for the Chinalco deal failure.

A long report to the State Council, or China's cabinet, says the Chinese deal failed because Chinalco did not do enough to engage other Rio shareholders or to fight the public relations war in Australia, The Age newspaper said.

The report says Rio kept Chinalco informed about its talks with BHP, and the State Council accepted that as global conditions improved it made more sense for Rio to link up with BHP in an iron ore joint venture than to tie up with Chinalco, a customer.

One important reason for blocking the vertical merger is conflict of interest, that is, when the major customer of Rio Tinto enters the board of directors, it will have certain rights to speak on product pricing which may harm the interests of Rio Tinto's other shareholders, it says.

The report concludes that China underestimated the backlash to the deal and the effectiveness of a campaign led by Rio's rival BHP against the Chinese state-owned company owning key resources in Australia.

It also outlines several mistakes China made which led to it losing the public relations war in Australia, including launching two other resources bids at the same time, Chinalco not lobbying enough, and not communicating with Rio Tinto's key shareholders.

It also says Chinalco tried to grab too much in the one deal, seeking a bigger equity stake and joint ventures in assets.

(Reporting by Sonali Paul; editing by Balazs Koranyi)