Countries without proper cyber regulations have been warned about engaging with China as the country pushes to position itself as a cyber superpower.
China is attempting to strengthen co-operation with other governments and companies to work on online regulation and set the rules, norms and values of the internet.
But the Australian Strategic Policy Institute says countries without tough policies in place need to "err on the side of caution" when engaging with the communist regime as it tries to commandeer cyberspace to shape discourse at home and abroad.
China is trying to replicate its own system of censorship in other jurisdictions and reshape the global norms such as free speech that are associated with internet usage, the institute's new report says.
"Countries should consider the future of cyberspace and what information should be shared, and even controlled, by countries such as China," it says.
"The Chinese Communist Party is enabling a division of cyberspace to create one that's susceptible to surveillance and ideological influence."
The report comes after concerns about Chinese and Russian cyber might were discussed in parliament as MPs passed a bill on Monday giving stronger powers to Australia's cyber spies.
Senator Jim Molan, a former army major general, told the Senate no country had seen the full power of China or Russia's cyber capability and Australia may only do so in the lead-up or during a war.
Australian Signals Directorate director general Rachel Noble said Australia had been beefing up its offensive cyber capabilities so other countries would think twice about the benefits of launching an attack.
Ms Noble said Australia's intelligence capabilities allowed the directorate to "undertake offensive cyber operations like no one else can" and its offensive capabilities would be able to shorten a war.