German Chancellor Angela Merkel said on Monday allegations that a German man had worked as a double agent for U.S. intelligence were serious and, if true, were a clear contradiction of what cooperation between partners is supposed to be about.

The case risks further straining ties with Washington, which have been sorely tested by revelations last year of large-scale snooping on Germany by the U.S. National Security Agency (NSA).

"If the reports are correct it would be a serious case,"Merkel told a news conference in Beijing, standing next to

Chinese Premier Li Keqiang.

"If the allegations are true, it would be for me a clear contradiction as to what I consider to be trusting cooperation between agencies and partners."

The White House and State Department have so far declined to comment on the arrest of a 31-year-old employee of Germany's BND foreign intelligence agency.

According to intelligence and political sources, the man admits passing documents to a U.S. contact.

Those include information about a parliamentary committee looking into allegations by former U.S. intelligence contractor Edward Snowden that Washington carried out major surveillance in Germany, including monitoring Merkel's phone.

 

SUSPICIONS

German Foreign Minister Frank-Walter Steinmeier, who was on a trip to Mongolia while Merkel was in China, said the spying case would have consequences if the circumstances are confirmed.

"We haven't finished clearing this up yet. But if suspicions are confirmed that American secret services were involved, it will become a political issue and we can't just get back to business as usual," he told reporters in Ulan Bator.

Surveillance is a sensitive issue in a country where memories of the Nazi's Gestapo secret police and communist East

Germany's Stasi ensure the right to privacy is treasured.

Speaking in Berlin, Snowden's lawyer in Germany, Wolfgang Kaleck, said he hoped the latest allegations might eventually help change Germany's stance towards his client, noting that European states had profited from his information but were not prepared to protect him.

As Merkel visited China, where she oversaw the signing of agreements involving Airbus Group NV's helicopter division selling 100 aircraft to Chinese companies, a German intelligence chief warned that some firms in China faced a

growing threat from industrial espionage by Chinese government agencies with huge resources.

"Germany is against that - regardless of where it comes from," Merkel said, in reference to industrial espionage.

"We have a duty as the state to protect our economy ... We are for the protection of intellectual property."

China's premier repeated his government's denial that it was involved in such activities.

"China and Germany, it can be said, are both victims of hacking attacks. The Chinese government resolutely opposes

hacking attacks as well as the use of the internet to steal commercial secrets or intellectual property," Li said. "China will engage in dialogue and consultation to protect the security of the Internet."