Beijing has accused Canberra of playing the victim in an increasingly bitter trade dispute while justifying a Chinese ban on Australian coal.
There has been no formal notification of the ban, but a spokesman for the Chinese foreign ministry did not deny it was in place.
He said everything China did was legal, responsible and in the best interests of its consumers and companies.
Prime Minister Scott Morrison said the ban would be a lose-lose for both countries and a clear breach of World Trade Organisation rules, as well as a China-Australia free trade agreement.
“That is very serious for Australia but it is actually bigger than that,” he told the Seven Network on Wednesday.
“That would be suggesting that China, if that were true, then that perception would take hold very quickly that they wouldn’t be treating those rules with the right respect.
“The World Trade Organisation’s rules are very important for the trading system around the world, and so I don’t think that would be in China’s interest, it wouldn’t be or our interest.”
Mr Morrison also emphasised it would force China to buy dirtier coal from other countries, putting its climate change ambitions at risk.
And he stressed that Japan and India took more Australian coal than China, with other key markets including South Korea also available to exporters.
The prime minister again called for leader-to-leader and ministerial-level dialogue with China to resolve the trade and diplomatic disputes.
“We’ve always been open for that mature conversation.”
Resources Minister Keith Pitt said Australia expected all its trading partners to play by the rules.
“We are doing our part,” Mr Pitt told the ABC.
“Australia has not moved in terms of the free trade agreements and we continue to meet what we said we would do. But we expect all of our exporters to have a level playing field, be treated fairly and that is what we are looking for.”
China has slapped a series of trade bans and tariffs on Australian goods as diplomatic tensions simmer over foreign interference and investment laws and calls for an independent inquiry into the origins of coronavirus.