UPDATE 1-Australia says China is holding detained writer in 'unacceptable' conditions

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* Chinese-born Australian writer detained for nearly a year

* Australia says Yang Hengjun denied basic standards of care

* Case threatens to stoke bilateral tensions (Adds background in par 4, 6-8)

By Colin Packham

SYDNEY, Dec 2 (Reuters) - Australian Foreign Minister Marise Payne said on Monday a Chinese-born Australian writer was being held by Beijing in "unacceptable" conditions, including daily interrogations while shackled.

Yang Hengjun, a former Chinese diplomat turned online journalist and blogger, was formally arrested in August on suspicion of espionage, seven months after he was originally detained in the southern city of Guangzhou.

Espionage is punishable by death in China, and Beijing has told Australia not to interfere.

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However, Payne said she was compelled to speak publicly after officials from Australia's embassy in Beijing recently visited Yang in detention.

"His circumstances of detention include increased isolation from the outside world, with restrictions on his communications with family and friends, and the resumption of daily interrogation, including while shackled," Payne said in an emailed statement. "This is unacceptable."

Payne said Australia has asked for an explanation of the charges against Yang, and requested that he be treated fairly in line with international norms, including being given access to his lawyers and family.

Strong trade ties between Australia and China add to the diplomatic sensitivity of the case, given China is Australia's biggest export market.

Although Yang's more recent writings had mostly avoided Chinese politics, he became prominent in the early 2000s when he earned the nickname "democracy peddler". (Reporting by Colin Packham; Editing by Peter Cooney and Jane Wardell)

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