The Australian government has been spying on China’s embassy in the country and “harassing” Chinese people to provide intelligence, an influential state-run newspaper said on Thursday, citing a security source.

China and Australia have close business and economic ties, but Beijing is deeply suspicious of Canberra’s defence relationship with Washington.

Quoting an unidentified official with “China’s national security department”, the Global Times tabloid, which is published by the official People’s Daily newspaper, said the Australian government was spying on China and monitoring Chinese people in Australia.

“The national security department staffer said Australia’s agents in disguise would get close to Chinese people working or living overseas to collect information or even encourage them to subvert China,” the report said.

“Meanwhile, in the name of avoiding ‘Chinese spy threats’, Australian intelligence operatives are closely monitoring Chinese people and the Chinese embassy in Australia,” it said.

The report said “many” Chinese people had been interviewed or harassed and were being required to give information about Chinese communities and the Chinese embassy.

“Some of the Chinese people were even sent back to China to gather information,” it said.

Chinese authorities have found “many eavesdropping devices at the embassy”, which had forced the government to renovate it, the employee told the newspaper.

It was not possible to reach China’s Ministry of State Security for comment as the ministry has no publicly available telephone number or website.

Neither the Australian foreign affairs minister’s office nor the Department of Foreign Affairs and Trade responded immediately to a request for comment about the Global Times article.

An Asio spokesman said: “Consistent with long-standing practice, Asio does not comment on intelligence matters.”

The Global Times comments come after a Four Corners investigation revealed more than $4m worth of donations were made to the major parties by an Australian Chinese citizen, Chau Chak Wing, who was a member of a Communist party advisory group known as a people’s political consultative conference.

Four Corners revealed that the Asio chief, Duncan Lewis, had become so worried about the influence of foreign donations that he organised meetings with the Coalition and Labor to warn them that some donors could compromise the major parties.

However the Chinese ambassador to Australia, Cheng Jingye, has said the report was simply an attempt to whip up a “China panic”. He said claims of Chinese interference were a “groundless” attempt to reheat old allegations, akin to “cooking up the overnight cold rice”.