North Korea has hit out at a Chinese company that said it was “cheated” out of mining assets by the state, providing a rare window into the commercial disputes that have dogged Chinese investment in the country.

Xiyang Group became one of North Korea’s biggest foreign investors in 2007 when it committed $38m to an iron ore treatment plant, but it withdrew after its contract was cancelled?in February this year. Last month Xiyang accused North Korean officials of breach of contract and extorting $800,000 in bribes.

Yesterday Pyongyang rebuffed Xiyang’s claims and accused foreign media of exaggerating the dispute to “drive a wedge between [China and North Korea] in their economic co-operation”. A government statement said that Xiyang was chiefly to blame for the cancellation of the contract, because it had “carried out only 50 per cent of its investment obligations”.