The Australian Defence Force has said it is keeping a close eye on a Chinese spy warship heading to Australian waters.

The Defence Force says it is keeping a close eye on a Chinese warship heading into Australian waters allegedly to spy on scheduled war games later this month.

The Auxiliary General Intelligence vessel is expected to closely monitor the United States and Australian exercises during the Talisman Sabre war games off the Queensland coast.

Decked out with advanced communications systems designed to listen in on enemy militaries, the ship was reportedly north of Papua New Guinea on Saturday night.

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The bilateral training activity takes place every two years and involves the "planning and conduct of mid-intensity 'high end' warfighting", the Defence Force website says.

"There is [an AGI ship] north of Australia at the moment," the ABC reported the Chief of Defence Joint Operations, Lieutenant General Greg Bilton said at the Talisman Sabre launch in Brisbane.

"It is international waters, they have the right to sail there.

"I'm not going to go into operational details, but we'll just take appropriate actions in regards to that vessel.

"It's a vessel that collects information, so it's not a great threat but we'll take appropriate action."

In a statement provided to news.com.au, the Defence Department said it was "aware that there will likely be interest from other countries in exercise Talisman Sabre".

"These issues are taken into account during the planning and conduct of exercises.

"Any questions relating to the movement of PLA vessels in international waters should be directed to the Chinese Government."

Director of a Sydney University-based research centre dedicated to American foreign and policy Ashley Townshend said in a tweet "this is about rules and double standards".

"China is allowed to perform military surveillance from outside our territorial waters" the director of foreign policy and defence at United States Studies Centre said.

"While Australia and US accept this United Nations Convention on the Law of the Sea principle, China fights it in the South China Sea by chasing other militaries away."

Last month, the secret arrival of three Chinese warships into Sydney Harbour surprised many.

The visit was kept so quiet even the NSW Premier Gladys Berejiklian wasn't aware the naval ships would be docking with more than 700 foreign sailors on board.

Prime Minister Scott Morrison's offhand assurance it was not a surprise and no more than a "reciprocal visit" didn't do much to quell the questions about why the public was left in the dark.

"It may have been a surprise to others, but it certainly wasn't a surprise to the Government," Mr Morrison told reports during his trip to the Solomon Islands capital Honiara.

"They were returning after a counter drug trafficking operation in the Middle East."

Three Chinese Navy ships made their way through Sydney Harbour to arrive at Garden Island. Photo / News Corp Australia
Three Chinese Navy ships made their way through Sydney Harbour to arrive at Garden Island. Photo / News Corp Australia

The three vessels which saddled up to Garden Island included the frigate Xuchang fitted with surface-to-air and anti-submarine missile systems, the auxiliary replenishment ship Luoma Hu and the landing helicopter dock Kunlun Shan.

Australian Strategic Policy Institute executive director Peter Jennings said the advanced nature of the ships showed just how much of a major player China had become in terms of military force.

"It is a clear indication that China is becoming a militarily very powerful country," Mr Jennings told news.com.au.

"Even 10 years ago it really wouldn't have had the ability to send this kind of show of force."

There has been a lot of debate about whether this visit can be interpreted as China flexing its military muscles, and according to Mr Jennings, there isn't really any other way it can be taken.

"It is definitely a show of force. You can't send three large warships into a foreign port without it being a show of force," he said.

Officials tried to downplay the visit by pointing out this wasn't the first time China's naval forces docked in Australia.

However, Mr Jennings said this was the largest force we have seen.

"It is true that there are ship visits in both directions, but this is the largest Chinese ship visit we have ever had," he said.