The recommendation is made in the new 300-page Australia-China Joint Economic Report – the product of a year-long collaboration between high-level officials, government advisers and economists from the two countries, and unprecedented in both its exhaustiveness and ambition.

The report is timely given last week's preliminary decision by Treasurer Scott Morrison to block the state-owned China State Grid from acquiring power network Ausgrid on national security grounds has seen accusations of bias against Chinese investment flare.

The report, authored by economists from the Australian National University's East Asian Bureau of Economic Research and government-affiliated think tank the China Centre for International Economic Exchanges, suggests building on the framework from the bilateral free-trade agreement to incorporate a "negative list" approach to which sectors could be invested in each respective country.

"The development of an investment agreement would require give and take on both sides and a more certain framework on both sides," the head of EABER, Peter Drysdale, told Fairfax Media, adding that uncertainty and lack of transparency in Australia's foreign investment review regime was a key concern raised by his Chinese counterparts.

"The worst possible effect on an investment environment is randomness in decision-making on an investment front and appearance of inconsistency.

"That's an issue that's become clear in the last few days not because of the particular case but because of what the particular case means to the management of the whole foreign investment policy system in Australia."

The China Centre for International Economic Exchanges has close ties to China's top economic planning body, the National Development Reform Commission – a status which emboldened the co-authors to express confidence both sets of governments would seriously consider the report's key recommendations.

"We didn't write this report for the sake of writing a report," Xu Chaoyou, the head of the centre's exchange department, said.

The report is also significant for its undertaking to stress-test various scenarios in assessing how the Australian economy should fare if China's economy dramatically slows, or even contracts in the next decade.

The future growth prospects of the Chinese economy remains a polarising debate for economists and analysts, though mounting concerns over China's surging credit levels and its inefficiency in contributing to GDP growth is almost universal.

Professor Drysdale said the report represented a serious attempt to define the parameters of the risks in the Chinese economy and their potential impact on the Australian economy. He said much of the talk of China's impending economic collapse was unjustified, and that Australia's priority was to get its economic policy strategy right to adapt to China's structural transformation.

"What we've tried to do is put some parameters on it and say 'well, you know, if China's growth slows down dramatically to zero for a few years and negative for a few years then what does this do where does this leave the Australia economy'," he said.

"When you do those exercises carefully and rigorously it suggests much of the blue-sky alarmism is not justified."