Australia and China should negotiate a comprehensive investment agreement clearly outlining which sectors are off limits to ward off repeated high-profile and diplomatically damaging rejections as seen with the blocked Ausgrid and Kidman bids, according to a new joint economic study.

The recommendation is made in the new 300-page Australia-China Joint Economic Report – the product of a year-long collaboration between high-level officials, government advisers and economists from the two countries, and unprecedented in both its exhaustiveness and ambition.

The report is timely given last week's preliminary decision by Treasurer Scott Morrison to block the state-owned China State Grid from acquiring power network Ausgrid on national security grounds has seen accusations of bias against Chinese investment flare.

The report, authored by economists from the Australian National University's East Asian Bureau of Economic Research and government-affiliated think tank the China Centre for International Economic Exchanges, suggests building on the framework from the bilateral free-trade agreement to incorporate a "negative list" approach to which sectors could be invested in each respective country.