SYDNEY: Australia warned Thursday it would not be intimidated by attempts at economic "coercion" after China threatened to undermine the multi-billion dollar flow of Chinese tourists and students to the country.

Beijing has issued warnings in recent days that Chinese should avoid Australia due to concerns about racist incidents targeting ethnic Asians during the coronavirus pandemic.

The comments were the latest salvo in a long-brewing diplomatic dispute between Australia and its largest trading partner.

Prime Minister Scott Morrison dismissed on Thursday allegations of racist treatment of Chinese as "rubbish".

"It's a ridiculous assertion and it's rejected," he said during a radio interview.

"We have an important trading relationship with China and I'd like to see that continue," Morrison said.

But he warned his government would "never be intimidated by threats" or "trade our values in response to coercion from wherever it comes". During the pandemic racism toward Asians has reportedly increased, according to the New South Wales anti-discrimination commission.