China is flagging new economic sanctions for Australia if the Albanese government goes ahead with a plan to take back control of the Port of Darwin.
Prime Minister Anthony Albanese pledged during the 2025 federal election to return the port to Australian hands, despite it being under a 99-year lease to the Chinese company Landbridge.
Chinese ambassador to Australia Xiao Qian said there had been talks between the two governments and his nation was "watching closely".
"If anything happens, like the port will be taken back by force or forceful measures, then we have obligation to take measures to protect the Chinese company’s issues. This is our position," he told reporters at the Chinese Embassy in Canberra on Wednesday.
"Should Landbridge be forced to leave that port, I think it might also affect the substantive investment co-operation trade between Chinese companies with that part of Australia.
"That is not in any interest of Australia."
Mr Xiao said he hoped the situation would not get to a stage where "the Chinese side has to do something".
China last imposed trade sanctions on Australian products in 2020 after the previous Morrison government called for an inquiry into the COVID-19 pandemic.
Beijing progressively removed the sanctions worth $20 billion after Labor came to office in 2022.
The port was leased in 2015 by the Northern Territory government to the Chinese-owned company, which immediately raised concerns about one of Australia's most strategic assets.
Both Labor and the coalition promised to bring the port back to Australian ownership during the election campaign.
Mr Albanese reiterated his pledge in Darwin on Tuesday, with a deal yet to be finalised.
"There are commercial negotiations and those commercial negotiations are continuing," he said.
Assistant Defence Minister Peter Khalil said the national security committee was assessing the port.
"There'll be announcements made from the government when the time is right," he told ABC News on Wednesday.
Australian National University associate professor Graeme Smith said Mr Albanese was unlikely to be taking this step solely for political gain, but noted a "performative element".
"China will have to do something if we (Australia) take back the Port of Darwin and trade sanctions do look the most likely to happen now," he told AAP.
Mr Xiao said Australia and China were "friends not adversaries" but issued a warning over Taiwan.
"We're somewhat flexible in managing some of the issues or differences in our two countries, for example, trade relations ... but Taiwan is not a question that we can compromise or be flexible," he said.
Beijing considers Taiwan, a self-governed democracy, to be a part of its territory.
In a joint communique in 1972, Australia "acknowledges" the position of the Chinese government, but stops short of accepting Beijing's claim to Taiwan.
Australia does not recognise Taiwan as a country, but maintains unofficial contact.
