China's Ambassador to Australia has launched a fierce defence of his country, accusing a joint investigation by ABC and Fairfax of trying to stir up "China panic".

The report, aired on Four Corners, revealed Australia's domestic spy agency ASIO warned the Coalition and Labor about taking donations from two billionaires with links to the Chinese Communist Party.

Prime Minister Malcolm Turnbull ordered a major inquiry into the nation's espionage and foreign interference laws following the investigation, and Labor is calling for a parliamentary inquiry.

But Ambassador Cheng Jingye argued it was a "sensational report" at an Australia China Business Council event at Parliament House in Canberra.

"Firstly, what was reported in the program is basically a kind of platitude. I've heard those allegations more than once since I was posted here. In Chinese, we call it 'cook up the overnight cold rice' — which means repeating the same old stuff again and again," he said.

"Maybe the producers of the program believe that those groundless allegations may turn [out] to be true after repeating a thousand times.

"Those who have fabricated the allegations really have an imagination which is wild and morbid. If they were to apply their imagination to scientific research, they might be accorded with a Nobel prize someday. Who knows?"

Mr Cheng said the allegations had been "made up out of thin air" and were politically motivated.

"Apparently, those people are not willing to see the continued growth of the friendly cooperation between our two countries and two peoples," he said.

"Their main purpose, as I see it, is to instigate China panic.

"A scholar that was interviewed in the program recently wrote that the program is not about Sinophobia. But that reminds me of an old Chinese saying — the more one tries to hide, the more his intention is exposed."