Asked about the price of a possible deal, he said: "200 billion is probably not enough."
A bid by Baosteel would challenge an all-share takeover proposal from BHP Billiton, whose chief executive has toured China, South Korea and Japan in an attempt to garner support from the region's steelmakers.
"Rio's assets, particularly in iron ore, are very valuable and will attract interest from any number of interested parties," said mining analyst James Wilson of DJ Carmichael & Co in Perth.
"Whether they can actually buy them is another story."
Rio Tinto declined to comment on the report. A supervisor at Baosteel Group's publicity department said he was not aware of any talks that would link Baosteel with a bid for Rio Tinto.
Shares in Chinese steelmakers rose on the report, with Baoshan Iron and Steel Co, a unit of Baosteel, up 5.15 percent to 15.52 yuan by midday. But Rio Tinto shares were down 2.59 percent at A$143.10.
In response to steelmakers' concerns that a merger would give the combined company too much clout on pricing, particularly in iron ore, BHP Chief Executive Marius Kloppers last week said the market, not BHP, would set prices and dismissed speculation that China might launch its own bid for Rio using its well-heeled sovereign funds.
Putting Cash to Work
Chinese industrial firms are scouring the outback in search of Australian mining companies willing to swap equity for cash to fund exploration and development. But none are on a scale of the sort that it would take to acquire Rio.
China's steel groups have so far kept investments in Australia largely to yet-to-start projects, such as Fortescue Metals.
Rio and BHP are the dominant iron ore miners in Australia's Pilbara region, the world's single largest deposit, shipping hundreds of millions of tonnes annually to steel mills in Japan,
Korea and increasingly China.
Another report on Tuesday quoted an executive at steel firm Shougang as saying the government and major steelmakers were studying a joint bid for Rio Tinto.
But the report, published by Bloomberg News, was denied by a Shougang executive, who said the report was incorrect.
"Shougang is not involved in, and will not be involved in, any joint bid for Rio Tinto Group," Tan Yixin, general manager of China Shougang International Trade and Engineering Corp Mineral
Import and Export Co, told Reuters. "The company is not aware of any joint bid among steelmakers in China for Rio Tinto Group."
Asked about the reports, Qi Xiangdong, a deputy secretary general with the China Iron and Steel Association, told Reuters: "We do not know anything on the takeover plan."