US federal prosecutors have charged Li Fangwei and his Limmt Economic and Trade Company with conspiring to conceal bank transactions through New York and allegedly selling Iran "sophisticated dual-use and weapons materials."

"It's totally a misunderstanding caused by false intelligence information," Li, who lives in the northeastern Chinese city of Dalian, told Dow Jones Newswires.

He told the news agency that the products he sells "are sold everywhere in the world" and are not used "to make weapons."

The US indictment alleges Li's company sold high-strength aluminium alloys, graphite and other materials known as dual-use as they have civilian purposes and are also used in rockets and centrifuges for enriching uranium.

Many of the materials are banned by the United Nations from being sold to Iran.

Li said he suspects the accusations are linked to a 2004 incident in which a shipment of graphite from his company, destined for Iran, was intercepted by US authorities.

The US said the shipment was for use in Iran's nuclear programme and confiscated it and, two years later, his firm was placed on a US sanctions list, Li told Dow Jones.

Payments from his Iranian clients made through US banks were seized, he said.

Since 2004, Chinese officials had questioned him about his business, and his government had said it would raise the issue with the United States through diplomatic channels, he said.

China's foreign ministry did not immediately respond to an AFP request for comment on the matter.

Prosecutors in the United States also allege that to conceal his illegal business, Li used a string of aliases and shell companies.

His "purpose in doing so was to use fraud and deception to gain access to the US financial system... and to continue the proliferation of banned weapons material to the Iranian military," the indictment read.

Li told Dow Jones Newswires that the companies identified as fronts for his business were not connected to him or his company.

He said he still did some business with Iran, but that many of his "Iranian clients backed off after seeing the sanctions list."

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