SYDNEY, July 7 (Reuters) - Prime Minister Chris Hipkins said on Friday New Zealand will require continued engagement with China, its largest trading partner, but would disagree with Beijing in areas where it challenges his country's national interests.

New Zealand has long been seen as a moderate or even absent voice on China in the Five Eyes intelligence-sharing alliance, which includes the United States and allies, and is carefully managing its relationship with China amid the strategic rivalry between Beijing and Washington.

"A strong, mature and complex relationship (with China) means we will have those tough conversations ... but I think it's better to be talking than not," Hipkins said in a speech at the New Zealand Institute of International Affairs.

New Zealand will continue to disagree with China on several issues, including human rights, but the path of engagement will be "open and honest", he said.

The speech comes about a week after Hipkins' six-day visit to China, which included meetings with Xi Jinping, where the Chinese president said Beijing had always treated New Zealand as a "friend and partner".

Hipkins said New Zealand must ensure greater economic resilience across its trade markets in a time of global uncertainty, adding its independent foreign policy did not mean a neutral stance.

"As a country, we may be small, but we are not bystanders. We chart our own course, with decisions that are in our national interest," Hipkins said, though he said any decision will not be "a radical departure" in the country's foreign policy.

ipkins said the U.S. has been pivotal to maintain the system of international rules that help keep New Zealand's interests safe, and he will continue to work closely with Washington.

Hipkins is heading to Europe on Friday for a week to witness the signing of the NZ-EU Free Trade Agreement and to attend the NATO Leaders' Summit in Lithuania.

DEFENCE

But while Hipkins said New Zealand must continue to fly the flag for peace, he said that the country could not be passive.

"We need to keep investing in our defence and security capabilities at home," he said.

New Zealand's defence spending sits at around 1%, according to the country's defence minister, and has struggled with ageing equipment for several years with a number of assets such as the frigates needing to be replaced in the next decade.

Hipkins said that the government would be releasing a number of documents about national security, defence and foreign policy including New Zealand's first National Security Strategy.

"They also help us to inform our decision making around ongoing investments in a combat-capable defence force," Hipkins said.

Reporting by Renju Jose in Sydney; Editing by Alasdair Pal, Raju Gopalakrishnan and Kim Coghill​