Veteran US senator John McCain has made a provocative call to hold massive naval exercises in the South China Sea, saying nations could band together to challenge Beijing's sovereignty over the disputed territory.

Key points: John McCain suggested US-led multilateral exercises could be a good vehicle to push back against China.

John McCain suggested US-led multilateral exercises could be a good vehicle to push back against China. He also accused China of "stealing other peoples' intellectual property"

He also accused China of "stealing other peoples' intellectual property" Senator McCain offered a passionate defence of the Australia-US alliance

The former Republican presidential candidate used a speech to the US Studies Centre in Sydney on Tuesday night to accuse China of acting "more and more like a bully".

"If the Chinese are able to stop us exercising freedom of navigation then that has severe consequences for the whole region," he said.

Senator McCain is chair of the powerful Senate Armed Services Committee and one of the most influential voices on the military and foreign policy in Washington.

When asked whether Australia should take part in freedom of navigation exercises in the South China Sea, he suggested US-led multilateral exercises could be a good vehicle to push back against China.

"I would not try to tell the Australians what they need to do, but there are exercises where a number of nations join together — we call it RIMPAC [Rim of the Pacific Exercise]— that the Australians participate in. They're broad naval exercises," he said.

"I would say that would be an opportunity for us to exercise this freedom of navigation."

Twenty-six countries took part in the most recent RIMPAC off the coasts of Hawaii and California in 2016 — including the US, Australia and China.

China claims control over the vast majority of the South China Sea but is entangled in territorial disputes with several countries in the region, including Brunei, Malaysia, the Philippines, Taiwan and Vietnam.

It has reacted angrily when US ships and planes have entered the area — and would bridle at any plans to hold multilateral exercises in the South China Sea without its permission.

The Senator was quick to add he understood the importance of Australia's economic relationship with China, emphasising the Australian government would have to make its own decisions about military exercises.

Australia urged not to turn its back on US alliance

Senator McCain begged Australia's political and military class not to turn their back on the US alliance. ( ABC News: Marco Catalano )

Senator McCain also used his speech to offer a passionate defence of the Australia-US alliance.

He acknowledged that US President Donald Trump's isolationist and unpredictable foreign policy had "unsettled" US allies like Australia, and made them question America's commitment to the liberal international order.

"I realise that I come to Australia at a time when many are questioning whether America is still committed to these values. And you are not alone. Other American allies have similar doubts these days," he said.

"And this is understandable. There is a real debate underway now in my country about what kind of role America should play in the world. And frankly, I do not know how this debate will play out."

But he begged Australia's political and military class not to turn their back on the alliance.

"The future of the world will turn, to a large extent, on how this debate in America is resolved," he said.

"That is why I and others are fighting so hard to ensure that America stands by our allies and remains an active, principled leader in the world. And we cannot do it alone. We need your help.

"Now more than ever, we Americans are counting on Australia and our other allies to stick with us … to encourage us to stay true to who we are at our best … and to remind us always just how much is at stake."

McCain accuses China of 'stealing' intellectual property

Senator McCain said China had achieved an "economic miracle," but gave a withering assessment of its behaviour as a major power.

"China is refusing to open more of its economy so that foreign businesses can compete fairly," Senator McCain said.

"It is stealing other peoples' intellectual property. It is asserting vast territorial claims that have no basis in international law. And it is using its trade and investment as tools to coerce its neighbours."

He mocked the attempt by Chinese President Xi Jinping to position his country as a bastion of stability and free trade at the World Economic Forum in Davos earlier this year.

"The idea that China is now the steward of our open, rules-based global economic order may sell at Davos," he said.

"But people in this country and this region know better."

And he declared that Australia did not have to "choose" between its alliance with the US and its economic relationship with China.

"The real choice, the real question, is whether Australia and America are better off dealing with China's strategic and economic challenges together, or by ourselves," he said.

Hints of a new US strategy in Afghanistan

The conflicts in Syria and Afghanistan loomed over Senator McCain's address.

Senator McCain again excoriated the Obama administration's strategy in Afghanistan, saying it had utterly failed to provide the resources US forces needed to cement gains in the country.

Australia announced earlier this week it would agree to a US request for more assistance and send another 30 troops to Afghanistan to help train the Afghan army.

But Senator McCain predicted that the Trump administration would soon unveil a new strategy in Afghanistan, and make further demands on allies like Australia.

"We're going to have a strategy not just not to lose, but to win and that's going to require a surge of some kind," he said.

"It will probably be announced fairly soon and it will probably entail a few thousand additional troops and we'll be asking friends and allies to supply additional troops as well."