Federal Treasurer Wayne Swan said he had approved the acquisition by Chinalco of up to 14.99 per cent of the shares in Rio Tinto plc, the London Stock Exchange listed arm of Rio Tinto Group.

A 14.99 per cent stake equates to an interest of about 11 per cent in the group, which includes the Australian listed Rio Tinto.

Mr Swan said he had raised no objections to the purchase under Australian foreign investment laws on the condition that Chinalco not raise its shareholding above 14.99 per cent without receiving fresh government approval.

Chinalco had also undertaken that it would not seek to appoint a director to Rio Tinto plc or Rio Tinto as long its holding is below 15 per cent.

''While Australia welcomes foreign investment in our economy, we will carefully examine national interest issues where these arise in relation to foreign sovereign ownership,'' Mr Swan said.

''I have determined that the undertakings agreed with Chinalco are acceptable for protecting the national interest in this matter.''

Chinalco paid about $15billion for its stake in Rio Tinto plc, representing the biggest offshore investment by a Chinese company.

Rio Tinto is attempting to fend off a $163billion takeover proposal from BHP Billiton.

Chinalco has insisted its move on Rio Tinto was a strategic investment.

The share raid stoked speculation that it was prompted by China to block BHP's plans for Rio Tinto, because of concerns about competition and pricing.

The Australian Competition and Consumer Commission approved the Chinaclo investment in February. AAP