Then in an awkward press conference later on Tuesday Senator Dastyari said he had not offered to step down, he had made a mistake and he was sorry.

But by Wednesday evening the Senator and former Labor NSW General Secretary offered his resignation and Mr Shorten accepted. "The last thing a Government as bad and divided as this one deserves is a free pass. I refuse to be the reason they escape proper scrutiny," Senator Dastyari said.

He said he acted within the rules, but conceded that was not good enough. "I made all the necessary disclosures and what I did was within the rules but it was wrong. I fell short of the duty of owe to the people I'm so proud to represent," he said.

Mr Shorten on Wednesday evening said it was "the measure of the man" that he could admit he was wrong. "Sam's made a mistake and now he's paying a heavy price," he said, adding he had "a lot more to offer Labor and Australia".

The Australian Financial Review revealed last week that he supported China in the South China Sea at an election campaign press conference and spoke against Australia's opposition to China's air defence zone at a press conference in 2014.

Senator Dastyari has been unable to confirm whether he supported China in the South China Sea, simply saying that if he misspoke or was misquoted then he was wrong.

The Chinese Communist Party newspaper used the purported comments to promote their cause and singled out Labor Senator Sam Dastyari as one of the country's key international supporters.

This came after it was revealed Yuhu Group's Huang Xiangmo covered a legal bill worth about $5000. Mr Huang heads the Australian Council for the Promotion of Peaceful Reunification of China, which is dogged by allegations it is backed by Beijing, something Mr Huang denies.


Media attention has also focused on Senator Dastyari's declaration that Top Education's Minshen Zhu had covered a $1600 travel overspend. Mr Zhu set up the first pro-Communist Party newspaper in Australia to fight against "anti-China forces" and present a positive image of the motherland.

He has not fully answered why he took funds for a legal bill from Mr Huang or for his travel overspend from Top Education's Minshen Zhu but said it was a mistake.

Senator Dastyari has also been linked to Chinese 'patriotic force' group. Senator Dastyari's flights, accommodation and hospitality for a 15-day trip to China in 2015 were funded by the Australian Fellowship of China Guangdong Associations Incorporated, of which Mr Huang is president. This was one of two trips by the senator paid for by organisations linked to Mr Huang.

The senator's former adviser, Paul Han, has also been reported by prominent Chinese-language newspaper, The New Express Daily, as a director of the same association, which the director of United Front Work Department called a "patriotic force". Senator Dastyari attended the organisation's launch at a gala ceremony in October 2014 at the Westin Hotel in Sydney.

Mr Huang said the group was supported by the Guangdong Overseas Chinese Affairs Office, a government body, which comes under China's State Council.