Foreign Minister Julie Bishop says she doesn't have security concerns about China staging navy exercises south of Indonesia because they took place in international waters.
It's believed to be the first time Chinese ships have ventured into waters between Australia and Indonesia, but the foreign minister said she would not raise the issue with her counterpart in Beijing.
"These exercises are taking place in international waters and Australia conducts similar exercises in international waters," she told the Australia Network's Newsline program on Thursday.
"The Chinese navy is growing, commensurate with the increase in size and strength of the Chinese economy and its place in the region and its place in the globe."
It was important that China was recognised as an emerging power, and that Australia's foreign policy was "flexible enough and nimble" enough to deal with this changing landscape.
The government would continue to raise concerns about any unilateral action in the region that could increase tension or threaten Australia's interests.
Around 40 per cent of Australia's trade is with China, South Korea and Japan, and the majority of it passes through the South China Sea where territorial disputes aren't rare.
"We don't take sides on the territorial claims, we just urge parties to de-escalate tensions," she said.
Ms Bishop was publicly upbraided by her Chinese counterpart last year when she voiced concerns about China declaring a no-fly zone over a disputed island chain also claimed by Japan.