China's second most powerful leader has moved to play down his country's "so-called" military build-up in the South China Sea around important trade shipping routes.

Prime Minister Malcolm Turnbull and Chinese premier Li Keqiang held bilateral talks in Canberra on Friday and the maritime dispute was among strategic issues discussed.

"With respect to the so-called militarisation, China never has any intention to engage in militarisation in the South China Sea," Mr Li told reporters in Canberra through an interpreter.

"China's facilities on Chinese islands and reefs are primarily for civilian purposes and even if there is a certain amount of defence equipment of facilities, (it) is for maintaining the freedom of navigation and overflight."

China would "bear the brunt" if shipping routes were disrupted because it was the largest global trader.

With its rich fisheries and oil and gas potential, the South China Sea has been a source of contention for decades.

China has copped international criticism for its reclamation activities in the disputed territory amid reports it has installed weapons on all seven of its artificial islands.

China claims most of the South China Sea, while Taiwan, Malaysia, Vietnam, the Philippines and Brunei claim parts of the waters.

Both Australia and the US are concerned about freedom of navigation across important trade shipping routes.

Mr Li noted in the past year up to 100,000 commercial ships sailed in the sea lanes of the South China Sea.

"There was no incident of attacks against those commercial ships," he said.

China and the grouping of south-east Asian countries (ASEAN) were in negotiations for a code of conduct.

Mr Turnbull said Australia hoped all parties resolved their differences peacefully and in accordance with international law.

"We encourage all parties to refrain from taking any actions which would add to tensions, including actions of militarisation of disputed features," he said.