BHP says fall in China demand 'short-lived'

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But BHP's shares fell 65p to 902p in London and Rio's gave up 15p to 2544p on talk that BHP will sweeten its $70 billion (£42.37 billion) all-share offer for the company.

"We remain confident that the ongoing industrialisation and urbanisation of China and other developing economies will continue to drive strong longer-term demand for our products," it said.

BHP has no plans to scale back investment or postpone projects. In contrast, Rio said last week it was reviewing its near-term spending and project costs and the timetable for the planned sale this year of $10 billion of assets because of the global crisis.

BHP unveiled record iron-ore production and a surge in output of oil and gas, and acknowledged that the Chinese market would be difficult in the short term.

"Chinese growth has softened during the quarter, albeit from very high levels," the company said. "We expect volatility and uncertainty to continue in the short term.

BHP boosted first-quarter iron ore production by 15% while copper output was flat against the same period a year ago. Production of steelmaking coal fell 4% as did energy-coal output.

Lower production at the giant Escondida copper mine kept output flat but output of petroleum, BHP's second-biggest earning commodity, rose by 15% to 34.8 million barrels.