A Lowy Institute report said on Sunday that China is capable of a direct missile strike on Australia and the threat of such a move is growing as Beijing amasses long-range and hypersonic weapons and builds islands in the South China Sea.

China's capacity to strike Australia would grow over the next decade as "the DF-27 intermediate-range ballistic missile, and potentially a conventionally armed intercontinental ballistic missile, grow in service numbers", the Sydney-based group said.

China condemned the report's "serious strategic misjudgement" on Monday, saying it was committed to "a path of peaceful development".

"The growth of China's military strength represents an increase in the forces for world peace," foreign ministry spokesperson Lin Jian told reporters at a news briefing.

"China's development of military strength is intended to safeguard national sovereignty, security and development interests and is not directed at any specific country," he added.

The report found the main threat to Australia was from Chinese missiles fired from ships, submarines and a new intermediate-range ballistic missile that could reach the island continent from China.

The DF-27 missile has a range of 5,000 to 8,000 kilometres (3,100 to 5,000 miles), the US military said in December.

The report said it was assessing Beijing's capability and not its intentions.

Lin urged the "relevant institutions" on Monday to "stop hyping up the so-called China threat" and to view the country's development in an objective, fair and rational manner.

Australia reshaped its military strategy three years ago in response to China's rapid navy build-up and rising friction between Beijing and Washington, focusing on deterring an adversary from its northern approaches.