BEIJING - China has lashed out at an Australian newspaper, calling its report of Chinese spies planted in leading Australian universities a "serious distortion" of the situation.

"We noticed the April 21 report on The Sydney Morning Herald (SMH). There is no factual basis for the report, contrary to news report's true, objective and impartial principles," the Chinese consulate general in Sydney said in a statement, according to The Global Times.

"There is a serious distortion of Chinese students studying in Australia and living situation in the report, which has greatly hurt the feelings of the majority of Chinese students and aroused their strong indignation and anxiety," added the statement that also questioned the paper's "ulterior motives".

The SMH, part of the Fairfax Media, reported on Monday that China is building large spy networks within Australia's leading universities which has prompted Australia to strengthen its counter-intelligence capabilities.

The report alleged that "Chinese intelligence officials have confirmed to Fairfax Media that they are building informant networks to monitor Australia's ethnic Chinese community to protect Beijing's 'core interests'".

It also claimed that Melbourne University and Sydney University were among the tertiary institutions "where more than 90,000 students from mainland China are potentially exposed to ideas and activities not readily available at home" being monitored.

Emphasising China's position as Australia's biggest source of international students, the Chinese consulate general in Sydney said: "We hope that the media uphold the objective and fair reporting principles to promote cultural exchanges and cooperation between China and Australia, and to jointly maintain the friendly feelings of the two peoples."