Australian Prime Minister Scott Morrison has scrapped the controversial Belt and Road Initiative (BRI) deal between China and the state of Victoria, calling it "inconsistent with Australia's foreign policy".
The decision made late on Wednesday night threatens to inflame already fraught diplomatic tensions between Canberra and Beijing.
Deploying Australia's powerful new veto powers under legislation passed last year for the first time, the Federal Government ended the deal, warning it was against Australia's interests.
"I consider these four arrangements to be inconsistent with Australia's foreign policy or adverse to our foreign relations in line with the relevant test in Australia's Foreign Relations [State and Territory Arrangements] Act 2020," Foreign Minister Marise Payne said.
In a statement, a Chinese Embassy spokesman condemned Australia's BRI move, which is expected to plunge the fractured relationship between the two countries into greater acrimony.
"We express our strong displeasure and resolute opposition to the Australian Foreign Minister's announcement on April 21 to cancel the Memorandum of Understanding on Cooperation within the Framework of the Belt and Road Initiative and the related Framework Agreement between the Chinese side and Government of Victoria," the spokesman said.
"This is another unreasonable and provocative move taken by the Australian side against China. It further shows that the Australian government has no sincerity in improving China-Australia relations. It is bound to bring further damage to bilateral relations, and will only end up hurting itself."
China argues the BRI is an initiative for economic co-operation. "The BRI co-operation between China and the Victoria state is conducive to deepening economic and trade relations between the two sides, and will promote economic growth and the wellbeing of the people of Victoria," the spokesman said.
Victorian Premier Daniel Andrews blindsided the Federal Government when he first signed the Belt and Road deal with the Chinese government in 2018.
It outlined a memorandum of understanding to take part in the A$1.5 trillion infrastructure programme, which is widely viewed as a global power play by China to expand its economic and geopolitical influence.
The states had previously been offered a deadline of March 10 to inform the Commonwealth of their deals with foreign governments.
"I haven't seen the benefits of it," Morrison said earlier this year. "If there are benefits, what are they and what was paid for them? I don't have the answers to those questions at this point, but the assessment of those arrangements will continue."
The Victorian Premier, who remains on medical leave had previously defended the deal against allegations it could pose a national security risk.
Labor leader Anthony Albanese has declared his own opposition to the deals, pledging Labor would not seek similar agreements.
"Certainly, there shouldn't be agreements that are inconsistent with Australia's national interest, or our foreign policy," Albanese said.
A Victorian government spokeswoman said: "The Foreign Relations Act is entirely a matter for the Commonwealth government.
"Victoria will continue to work hard to deliver jobs, trade and economic opportunities for our state."
Relations between China and Australia have been tense since a bitter trade war erupted in 2020.