Chinese envoy says Australia ties must be mended before solving trade issues

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FILE PHOTO: Illustration shows printed Chinese and Australian flags

SYDNEY (Reuters) -More work needs to be done to reset relations between Canberra and Beijing, China's ambassador to Australia said on Wednesday, adding that the two nations had not yet reached the stage of resolving political and trade disputes.

Australia's largest trading partner, China put sanctions on its products from coal to wine and seafood after Australia urged an inquiry into the origins of COVID-19 and put a 5G network ban on telecoms giant Huawei.

Ambassador Xiao Qian said there had been no meeting between leaders of the two nations in recent years because Beijing believed a face-to-face meeting could worsen strained ties.

"It's because we did not believe the meeting would help to improve the relationship and we were concerned the meeting could perhaps make things even more deteriorated," he said at the National Press Club in Canberra, the capital.

The foreign ministers of both nations met last month for the first time in three years, on the sidelines of a G20 meeting in Bali, after the election of a Labor government.

Despite some contact between ministers, "we have not yet come to the stage to discuss about how to solve those specific issues, political issues, trade issues", Xiao added.

He said it was "a good start only and there is a lot to be done to really reset this relationship".

Coal stocks jumped last month on rumours that China would lift an unofficial ban on Australian coal in place since 2020.

China is also the largest buyer of Australia's iron ore.

On Saturday, the Chinese embassy criticised a joint statement from Australia, Japan and United States that expressed concern over China's military exercises in the Taiwan Strait.

Xiao said Australia should not misinterpret the "One China" policy. "On the question of Taiwan, there is no room for compromise," he said.

Asked about comments by China's ambassador to France that people in Taiwan would need to be "re-educated", Xiao declined to use the term, and said people in Taiwan had a different perspective about the motherland.

"I think my personal understanding is that once ... Taiwan is united, comes back to the motherland, there might be process for the people of Taiwan to have a correct understanding of China," he said.

(Reporting by Kirsty Needham; Editing by Gerry Doyle and Clarence Fernandez)