Opposition Leader Bill Shorten has pledged to renew scrutiny of China's human rights record and labelled the country's crackdown against Muslim minorities "gravely disturbing" in the first public comments on the sensitive subject from a leader of a major Australian political party.

Mr Shorten outlined his approach to the fraught Australia-China relationship after flagging the creation of a government-backed infrastructure investment bank for the Pacific – prompting warnings from the development sector about a "lending race" in the region.

As global concern grows about the Chinese Communist Party's mass detention of up to 1 million Uighurs and other Muslim minorities under a broader crackdown in the north-western province of Xinjiang, Mr Shorten said Labor would speak "truth to power" in a respectful way.

Bill Shorten speaking at the Lowy Institute on Monday. Credit:AAP

"Where values diverge, we won't ignore issues. What I won't necessarily do is do it through a megaphone but I would like to see us resuscitate a greater human rights dialogue with China," he said in response to questioning after a foreign policy address to the Lowy Institute on Monday.