AUSTRALIA'S foreign investment watchdog has sent a blunt signal to Beijing that state-owned Chinese companies trying to acquire bigger stakes in Australian mining assets will face further knockbacks.

In a rare public disclosure, Foreign Investment Review Board director Patrick Colmer has declared the board would prefer state-owned companies kept their stakes in Australia's peak mining assets to no more than 15 per cent - to ensure most of the sector stayed in private hands.

Mr Colmer's comments at the Australia-China Investment Forum in Sydney gave a rare insight into how the regulator views the recent surge in investment from our biggest trading partner.

''In the resources industries our Government has expressed a preference for projects which are joint projects in various forms,'' Mr Colmer said. ''We are much more comfortable when we see investments which are below 50 per cent for greenfields [undeveloped] projects and [about] 15 per cent for major producers.''

The Treasurer, Wayne Swan, has previously published guidelines for investment by state-owned companies but not specified how big a stake is acceptable.

Mr Colmer's comments come after several Chinese investments were rejected by the Government, prompting calls that Sino-relations are turning sour.

In the latest case, yesterday the state-owned China Nonferrous Metal Mining dropped a plan to buy 51 per cent of the miner, Lynas Corporation, after the Foreign Investment Review Board asked the buyer to cut its stake to less than 50 per cent. And this week the Defence Department blocked the state-owned

Wuhan Iron and Steel's bid to take a 50 per cent stake in Western Plains Resources' magnetite project at Hawks Nest, in South Australia.

Without naming companies, Mr Colmer said foreign investment was crucial to the economy but this needed to be balanced with keeping public support. The board also preferred that most big miners remained publicly listed companies, he said, to ensure they served all Australia's trading partners.

In the past 18 months the board had received 90 Chinese investment proposals, worth $34 billion, he said, compared with $7.48 billion approved in 2007-08. Most had been passed without public interest or controversy, but Mr Colmer warned against trying to sidestep the regulator.

The rare public comments come amid growing calls to repair ailing relations with China. Yesterday the former prime minister Bob Hawke said it would be foolish to deny the relationship was strained. ''It behoves all of us to do all that we can in our various ways to ensure that we restore that relationship to the optimal level that it had for so many years,'' he told the conference.