China is Australia's largest trading partner and the biggest customer for its iron ore, but relations have deteriorated in recent years. China has imposed trade sanctions on Australian products in response to policies and decisions such as Australia's call for an investigation into the origins of COVID-19 and its 5G network ban on Huawei.

Australian Prime Minister Anthony Albanese, who took office late last month, has said China needs to lift its sanctions on Australian products to improve relations. His government has also expressed concern at China's move to strike a security pact with neighbouring Solomon Islands.

Ambassador Xiao Qian said in a speech at the University of Technology Sydney's Australia-China Relations Institute that Australia had caused the breakdown in ties, and called for the new government to take action.

"The previous government in this country made certain policies and took certain actions that virtually stopped the normal business cooperations and relations between Huawei and the counterparts in Australia," he said in response to a question.

"That perhaps could be described as the first shot that really damaged our normal business relations."

He disputed that China had imposed trade sanctions on Australian goods, and said they were a response to dumping complaints by Chinese companies, or Chinese consumers expressing their unhappiness at Australia.

As he spoke, protesters, some in business attire, heckled him and held aloft placards about Tibet, Xinjiang and Hong Kong independence.

There was an "opportunity for possible improvement of relations" with the new Australia government after the exchange of letters between leaders of the two nations, and a meeting between defence ministers on the sidelines of a Singapore conference, Xiao said.

"There are five major areas where it is important at least in my view for China and Australia to make joint efforts," he said.

Australia should respect China's socialist political system, stick to mutual benefit in economic matters with "favourable and fair" policies, be rational on security, cooperate with China in regional affairs, and "properly handle differences", he said.

The institute's director, James Laurenceson, raised the treatment of two Australian journalists in prison in Beijing, including a former student at the university, as they wait for verdicts in national security trials.

Xiao said restrictions on the frequency of prisoners having diplomatic contact were caused by COVID-19 measures being taken in China.