BHP Billiton mines a third of the world's iron ore
Shares in BHP Billiton have jumped on fresh speculation a Chinese investor is eyeing up a 9% stake in the company.
The Australian newspaper said "Chinese interests" have approached an Australian investment fund to help buy into the world's biggest miner.
The move would help China secure supplies of key raw materials, such as iron ore and oil, needed to fuel its booming economy.
BHP is currently mounting a hostile bid for rival Rio Tinto.
The newspaper report said the Chinese aimed to buy a 9% stake in BHP by teaming up with an Australian pension fund and a private equity investor.
Buying a stake in BHP may also help Beijing scupper the miner's bid to take control of Rio Tinto.
BHP launched a hostile bid worth around $147bn (£74.8bn) for its rival in November last year, offering 3.4 of its own shares for each Rio Tinto share.
Such a tie-up would create a mining superpower with control of a third of the world's iron ore, a key ingredient for making steel.
China, which buys 40% of its iron ore from these two mining companies, is worried the new group would have too much control over the supply and prices of the raw materials fuelling its red-hot economy.
"Security of supply is essential for China, for a whole range of commodities from iron ore and copper to oil," said Asa Bridle, mining and metals analyst at Seymour Pierce.
"China doesn't want to be held to ransom by mining companies."
Regulators in South Africa, Canada, the US, the European Union and steelmakers in Japan have all expressed reservations about the proposed takeover.
BHP-Rio entity would control third of world's iron ore
China imports 40% iron ore from BHP and Rio
Group would control 10% global copper & aluminium supplies
Regulators are worried about proposed takeover
Chinese interest in Australia's mining sector has been hotting up this year.
In February, China's state-owned aluminium group Chinalco teamed up with US rival Alcoa to buy a 9% stake in Rio Tinto while Sinosteel's $1.3bn bid for Midwest Corp was given the green light by Australian authorities last month.
BHP's shares are dual listed in London and Sydney.
Its Australia-listed shares rose as much as 4% on Friday to a record high of 50 Australian before closing 1.5% higher at 48.70 Australian dollars.
But BHP's London-listed shares fell, with analysts saying rumours of a Chinese share raid had been priced in during the previous trading session when shares rose 3%.