Chinese Foreign Minister Wang Yi has said neither China nor the United States can "afford" a military conflict and any "sober-minded" politician knew it.
Mr Wang's comments, after lengthy talks with Foreign Minister Julie Bishop in Canberra on Tuesday, follow a period of aggressive rhetoric during which new US Secretary of State Rex Tillerson threatened to stop Chinese activities on reclaimed islands in the South China Sea.
Ms Bishop said she was reassured that both the Chinese and US governments have signalled they will work together and reiterated that Australia would maintain its current neutral stance on the issue.
Ms Bishop met with her Chinese counterpart in Canberra on Tuesday and also spoke by phone with Mr Tillerson.
The conversations gave her a sense "that both sides are determined to work together, that potentially this is a new era of cooperation between the United States and China and that both sides realise the importance of the US/China relationship to peace, stability and prosperity in our region".
Mr Wang insisted the US and China relationship had defied all kinds of difficulties in the past 40 years and emphasised diplomacy was the best way to resolve disputes.
"Any sober minded politician will recognise that there can not be conflict between China and the United States," Mr Wang told reporters in Canberra, through an interpreter, after his meeting with Ms Bishop.
"Both will lose and both sides cannot afford that."
Ms Bishop said Australia had informed China in the past, "and we continue to do so, we don't support reclamation, militarisation, the scale and speed of the construction works on these islands, and that any maritime disputes should be settled peacefully".
"That's what the countries [the Philippines and China] are now doing", she said.
"Australia's position is we don't take sides in regard to territorial claims but we urge calm, we urge negotiation between the parties and Australia will continue to exercise our rights for freedom of over-flight, freedom of navigation because we want to ensure there is freedom of access for our trading routes."
China claims most of the South China Sea, while Taiwan, Malaysia, Vietnam, the Philippines and Brunei claim parts of the waters that command strategic sea lanes and have rich fishing grounds along with oil and gas deposits. The US is concerned about freedom of navigation in important trade routes.
Asked if the US had asked Australia to join any exercises to more aggressively challenge the Chinese presence, Ms Bishop said "no there has not been any request".
With wires
