SYDNEY - Australia said all decisions on foreign investment are made in its national interest and it expects trade talks with China to continue, after reports Beijing had protested Canberra's decision to block a Chinese investment in a rare earths mining company.

Treasurer Jim Chalmers said on Wednesday he had blocked a Chinese investor from raising its stake in a rare earths mining company this month on the advice of the Foreign Investment Review Board.

Australia blocked Yuxiao Fund, which is the Singapore-registered private company of Chinese mining investor Yuxiao Wu, from raising its ownership of Northern Minerals to 19.9% from 9.92% on "national interest" grounds, the Australian miner told Reuters.

The South China Morning Post reported China had protested the decision, citing unnamed sources.

"All investment decisions are made in Australia's interests and within the regulatory framework," a spokesperson from Australia's Department of Foreign Affairs said in a statement to Reuters on Friday.

China's embassy in Australia did not immediately respond to a request for comment.

Relations between the two countries have been improving after a years-long diplomatic freeze, with Australia asking China to remove unofficial "trade blockages" on its exports.

China is pressing for Australia to drop its complaints over Beijing's sanctions on barley and wine at the World Trade Organization.

Foreign Minister Penny Wong and her Chinese counterpart Qin Gang discussed bilateral trade impediments on Thursday on the sidelines of the G20 in New Delhi, the statement said.

"The Australian Government looks forward to continued engagement," it said.

Wong told reporters after the meeting "both parties can grow our bilateral relationship while safeguarding our national interests, if we both navigate our differences wisely".

Australia has previously said it would become more selective about who it lets invest in its critical minerals industry, amid concern about monopolies.

Northern Minerals plans to become the first significant world producer of dysprosium, a key component for magnets for electric vehicles, outside China which controls 94% of supply.