The federal government used new powers to rip up two deals made between the state of Victoria and China.
Canberra said it was backing away from the agreements to protect Australia's national interest.
The Chinese embassy in Australia branded the move "provocative".
It said the action by Canberra was "bound to bring further damage to bilateral relations, and will only end up hurting itself."
"It further shows that the Australian government has no sincerity in improving China-Australia relations," a spokesperson said in a statement.
It is the first time Canberra has used the powers to veto deals made by states, local governments or public universities with foreign countries. The laws allow the government to cancel agreements deemed to threaten Australia's national interest.
In addition to the China deals, Foreign Minister Marise Payne also scrapped agreements with Iran and Syria. They were a memorandum of understanding sealed between Victoria's education department and Iran, signed in 2004, and a 1999 scientific cooperation agreement signed with Syria.
Senator Payne said the four agreements were "inconsistent with Australia's foreign policy or adverse to our foreign relations".
Speaking to the Australian Broadcasting Corporation, she defended the government's decision and said she did not expect China to retaliate.
"I think Australia is acting in our national interest, we are very careful and very considered in that approach," she told the AM radio programme.