Malcolm Turnbull has admitted there are bubbling tensions with China, but denied there was a "deep chill" in relations.
Bilateral ties took a dive late last year when Canberra announced wide-ranging reforms to espionage and foreign interference legislation, singling out China as a focus of concern.
It sparked a furious response from Beijing, which summoned Australia's ambassador and attacked local media stories about infiltration, describing them as fabrications based on hysteria and paranoia.
The ice has yet to thaw, with another spat in January prompting Beijing to lodge a formal diplomatic protest after a senior Australian minister called Chinese infrastructure projects in the Pacific "white elephants".
The Australian Financial Review said on Thursday China's leadership was so incensed by Canberra's rhetoric that it was regularly refusing visas to ministers and a major annual showcase of Australian trade and business in China looked certain to be abandoned this year.
The newspaper characterised it as a deep chill with the country's top trading partner, but Prime Minister Malcolm Turnbull was keen to play the story down.
"There has certainly has been a degree of tension in the relationship that has arisen because of criticism in China about our foreign interference laws," he told the radio station 3AW in Melbourne.
"All I would say is there has clearly been some misunderstandings and mischaracterisations of our foreign interference legislation in the Chinese media."
He added that while his government had "a very strong and respectful relationship" with China, "we do everything we can to ensure any foreign interference in our politics is open and declared".
Reforms to espionage and foreign interference laws were proposed after Australia's spy agency raised concerns that China was interfering in local institutions and using the political donations system to gain access.
The frosty relations were highlighted by Australia not sending a minister to the recent Boao Forum - dubbed the Asian Davos - which Chinese President Xi Jinping attended and where Canberra usually has high-level representation.
The Financial Review noted that Foreign Minister Julie Bishop had not visited China for more than two years and Turnbull was last on the Chinese mainland to attend the G20 summit in September 2016.
When pressed on whether ministers had been declined visas to visit China, Turnbull replied: "I wouldn't go that far", while declining to give a yes or no answer.