Home Affairs Minister Peter Dutton has rejected suggestions Australia must choose whether China is a friend or foe.
Australia is walking a diplomatic tight-rope as a trade war between the United States and China drags on.
"We don't need to be an enemy with China to be a friend with the United States," Mr Dutton told Nine's Today Show on Friday.
China is Australia's largest trading partner and the US its closest security ally.
The tit-for-tat trade tussle between the two superpowers is casting a long shadow over Prime Minister Scott Morrison's meetings with international leaders in Vietnam and France this week.
Former prime minister Kevin Rudd, who runs an Asian policy think-tank in New York, believes the trade war will soon be resolved.
"The fundamental economic interests of both presidents require them to reach an outcome," Mr Rudd told the National Press Club in Canberra.
"It will be an untidy deal, it'll be a dirty deal. If it's to be done, it'll be done by Thanksgiving (November 28)."
Mr Dutton said China's economic growth should be celebrated, but nations ought be wary of its ambitions for strategic dominance.
"We want to see China grow. We want to see people come out of villages into the cities. We want to see the country prosper," he said.
"But at the same time, we don't want to see naval ports popping up in our part of the world, we don't want to see undue influence in our region, and so we will work closely with our neighbours.
"We need to accept that China is a very different system of government, of society, than we operate here."
Acting opposition leader Richard Marles said Australia could be hit hard by the escalating trade stoush.
"No one wins - we certainly don't win - out of a trade war between the US and China," Mr Marles said.
"There's a real danger in a sense that we're collateral damage here."
As the two superpowers jostle for dominance, Mr Marles said Australia should not consider the contest in "completely binary" terms.
"China growing is good for us economically," he said.
"But they're doing what great powers do, and that is seeking to shape the world around them."
He and Mr Dutton both argued China must be made to comply with international trade and shipping laws.
Australian Associated Press