China's ambassador said on Friday Australia had fired the "first shot" in deteriorating trade relations but that there was an opportunity to improve bilateral ties if the new government in Canberra took action.

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 Beijing'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.

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 added. (Reuters)