China's state-controlled media has bluntly warned Australia's warships to stay out of the South China Sea or risk the "bitter pill" of confrontation.

In an ominous threat to Prime Minister Scott Morrison, China is doubling down after the furore over a shocking doctored image depicting a grinning Australian soldier slitting the throat of an Afghan child, news.com.au reports.

In an editorial published overnight in The Global Times, Australia is described as "the warhound" of the United States.

"As a warhound of the US, Australia should restrain its arrogance. Particularly, its warships must not come to China's coastal areas to flex muscles, or else it will swallow the bitter pills,'' the editorial states.

"Australian special forces murdered 39 Afghan civilians and prisoners. Killing innocent people is trampling on human rights no matter what. But Canberra has the nerve to put itself on the moral high ground of human rights. How arrogant and shameless the Morrison government is!"

China maintains a maritime militia in the South China Sea - officially called the People's Armed Forces Maritime Militia (PAFMM) that plays a key role in Beijing's strategy to enforce its disputed sovereignty claims.

Asia Institute fellow Rowan Callick told news.com.au that the Global Times editorial was a clear reference to the South China Sea.

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"Australia has refused to do these freedom of navigation protocols. It's a warning that if we change our strategy and participate in these freedom of navigation cruises something may or may not happen," he said.

"I don't think the Global Times is the vehicle to place highly strategic messages. It's one to place general sentiment. If People's Daily was to editorialise on this, that Australia's ships should watch out, that would be more disturbing. This is disturbing enough."

Former Labor MP Michael Danby said the editorial represented a clear warning and follows recent activity involving HMAS Ballarat.

"That's a threat. HMAS Ballarat was in the South China Sea recently with the US taskforce,'' Danby said.

"That's very ominous. It's suggesting there might be an incident."

According to the US Navy, the HMAS Ballarat conducted drills, integrated tactical training, and warfighting scenarios and a combined transit to the Andaman Sea through the Strait of Malacca in late October.

"We find tremendous value in sailing alongside our close allies of Australia, as well as our other allies and partners, in support of a free, open, secure, and prosperous Indo-Pacific Region," Commander Ryan T. Easterday said.

Commanding Officer of Ballarat, Commander Antony Pisani was also quoted as praising the chance to "hone our warfare and mariner skills and develop our ability to operate and communicate together".

In July, Australian warships sailing near the disputed Spratly Islands in the South China Sea were confronted by the Chinese navy.

It was reported at the time the HMAS Canberra, HMAS Hobart, HMAS Stuart, HMAS Arunta and HMAS Sirius all remained outside 12 nautical miles of the contested islands, unlike recent so-called "freedom of navigation" exercises conducted by the US navy to challenge Beijing.

The previous year, Australian navy helicopter pilots were hit by lasers during exercises, forcing them to land as a precaution.

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Firing a fresh broadside at Australia, the Global Times editorial also threatens trade ties, noting Australia is considering taking complaints toward China's trade imposition to the World Trade Organisation (WTO).

"Australia treats China's goodwill with evil. It is not worthy to argue with it. If it does not want to do business with China, so be it. Its politics, military and culture should stay far away from China - let's assume the two countries are not on the same planet,'' the editorial states.

"Beijing does not fear going to the WTO with Canberra. China will acknowledge it if it loses, but the result will certainly be that all Australia's accusations will fall flat."

It went on: "The fact is that as China-Australia relations remained warm in the past, Chinese society did not find fault with imports from Australia. But now, Canberra implements a wolf-style policy toward China and has become the most savage accomplice of US suppression of China. China, in response, needs to review its Australia policy and act according to the rules."

But as tensions mount, Labor's foreign affairs spokeswoman Penny Wong warned a careful response is required.

"I think it was a deliberately provocative image. It was an offensive, inflammatory image and it was rightly condemned by all parties and by the Australian community,'' she said.

"What we need to do, and what we should do is to respond calmly and strategically and not be emotional.

"The photograph or the doctored photograph, the offensive doctored photograph is not the behaviour of a responsible, mature international power. Clearly it is sending a message and we have to choose how we respond to it and I think we have to respond with unity as we have and we have to recognise it for what it is - deliberate provocation and that it is inflammatory."