Foreign ministry spokesman Zhao Lijian said Australian officials cited a possible violation of the country's foreign interference laws for their raids, but had not provided a "reasonable explanation" for the searches.
ABC reports that at the end of last week, Chinese security officials showed up at the homes of the two reporters after midnight to tell them they were banned from leaving the country and would be questioned about a national security case.
Mr Zhang maintains he has done nothing wrong and is challenging the investigation in the High Court, arguing Australia's foreign interference laws are unconstitutional because they breach the implied freedom of political communication.
Relations between the two major trading partners have become increasingly strained, and Beijing's revelation that Australia had conducted the raids in late June came as a well known Chinese academic confirmed that his Australian visa had been canceled on security grounds.
Asked if it could confirm the raids, the Chinese embassy in Canberra said in an emailed statement to Reuters it had "provided consular support to Chinese journalists in Australia and made representations with relevant Australian authorities to safeguard legitimate rights and interests of Chinese citizens".
A spokesperson for Asio, Australia's intelligence service, said: "As is long-standing practice, Asio does not comment on intelligence matters".
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The Xinhua report said the Australian searches, which it described as "raids", were carried out on an unspecified number of Chinese journalists' homes by intelligence personnel on June 26.
The raids, undertaken under a warrant, were connected to the investigation into allegations of attempted Chinese infiltration of the NSW parliament through the office of NSW Labor state MP Shaoquett Moselmane, and in particular his part-time staffer John Zhang. He was secretly detained in China in mid-August.
Australia's already tense relationship with China worsened this year after Beijing vowed trade reprisals and said it was angered by Australia's call for an global inquiry into the source of the coronavirus pandemic.
"The perception of risk and real risks around China have been growing", said Philipp Ivanov, chief executive officer of the Asia Society in Australia. They were told they couldn't leave the country without answering questions. He was informed that he could not leave the country and would face questioning concerning a "national security case". Yesterday, the Australian Broadcasting Corporation's Beijing reporter and The Australian Financial Review's Shanghai reporter both arrived back in Australia.
The Australian government has also called for an worldwide investigation into the origins of the coronavirus pandemic, a request that has infuriated Chinese leaders. "If their bilateral relationship deteriorates, then their own nationals will be in the firing line as well", he said.
Beijing has taken a series of trade measures, including the imposition of steep tariffs on Australian barley, the suspension of import permits for several red meat processing plants, and the investigation of Australian wine exports.