China has issued a stern warning to New Zealand over the Government's decision to suspend its extradition treaty with Hong Kong.

The Chinese Embassy in New Zealand labelled Foreign Minister Winston Peters' announcement as a "gross interference in China's internal affairs", and to stop now to avoid harming the two countries' relations further.

Peters said on Tuesday China's passing of the legislation has "eroded rule-of-law principles" and "undermined the 'one country, two systems' framework" that underpins Hong Kong's unique status.

The Embassy said in a statement New Zealand's "interference" is something the Chinese side has "strong opposition" to.

"The Law on Safeguarding National Security in the Hong Kong SAR is an important step to ensure the steady and sustained implementation of the 'one country, two systems' principle. Its implementation will strengthen Hong Kong's legal framework, ensure social order, improve business environment and contribute to Hong Kong's long-term prosperity and stability," its statement said.

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"Any attempt to pressure China on the issue of Hong Kong will not succeed. The Chinese side urges the New Zealand side to abide by the international law and the basic norms governing international relations, immediately stop interfering in Hong Kong affairs and China's internal affairs in any forms to avoid further harm to China-New Zealand relations."

The relationship is worth over $30 billion to New Zealand, since China is our largest trading partner.

Peters says the undermining of the city's 'one country, two systems' arrangement compromises the independence of Hong Kong's justice system.

"It's clear the law is no longer what it was, therefore the extradition law we have doesn't stand up.

"We're asking them to live up to the commitment they made to us."

But New Zealand wasn't the first to make this move, with Waikato University international law professor Alexander Gillespie saying it was the last of the Five Eyes countries to do so.

"It's the minimum step we could do to stay in line with our partners. We should be concerned we haven't gone as far as our Five Eyes laws," he says.

Beijing passed its new security law legislation earlier this month. It bypasses Hong Kong's local Parliament, which Western politicians have said breaks the 'one country, two systems' framework Hong Kong has been operating under.

The new law allows extradition to the Chinese mainland for trial. It punishes crimes of separatist activity, state subversion, terrorist activity and collusion with foreign forces, which can be punishable by up to life in prison.