Australia said a security review of a 99-year lease held by Chinese company Landbridge on the northern port of Darwin, a key focus of its defense strategy, found it was "not necessary to vary or cancel the lease".
In a statement, the prime minister's department said: "Australians can have confidence that their safety will not be compromised, while ensuring that Australia remains a competitive destination for foreign investment".
It added that monitoring of security arrangements would continue around the northern port, Australia's closest to Asia, where Landbridge operates a commercial wharf and cruise ship terminal.
During a diplomatic dispute that is now easing, China had criticized Australia for blocking Chinese investment in infrastructure on national security grounds.
The 99-year lease of the commercial port to Landbridge was put under scrutiny in 2021 by the Australian government as it boosted foreign investment screening.
After it won election in 2022, Prime Minister Anthony Albanese's Labor government launched a second review, involving defence, foreign affairs and security agencies.
The announcement the lease would not be varied or cancelled comes ahead of Albanese's visit to Washington next week, and ahead of an expected visit to China this year.
The U.S. State Department said it had no comment on the Australian statement.
Landbridge won a bidding process in 2015 to operate the port in a deal worth A$506 million ($390 million).
The awarding of the contract to Landbridge by the Northern Territory government came just a few years after the United States posted the first of a rotating group of U.S. Marines in Darwin.
The size and scope of U.S. military rotations through northern Australia, and the strategic importance of northern bases, has been boosted after an Australian defence review said in April China is undertaking the largest military buildup of any country since the end of World War Two.
Peter Dean, director of foreign policy and defense at the United States Studies Centre in Sydney, said it was likely the government would seek to build a second port in Darwin harbor or nearby for military use.
"Naval assessments have been saying they want a dedicated wharf on their own," he said.
Dean, one of the authors of Australia's Defence Strategic Review, said the port leased by Landbridge was physical infrastructure, so didn't pose the same security risk as a power grid or 5G network, areas where China has previously been blocked from investment.
"Absolute worst case scenario, you just nationalise it and take it back. We need to find areas where we can collaborate with China," he said.
Landbridge and Darwin Port said in a statement the decision "reaffirms our position that there is no basis for security concerns given the Port is operated as a commercial enterprise in accordance with Australian Law and the Port transaction documents".
Australia is pushing for China to lift trade blocks on its wine industry ahead of the Albanese visit, with a World Trade Organization ruling on the dispute imminent.
(Reuters - Reporting by Kirsty Needham; additional reporting by David Brunnstrom; Editing by Raju Gopalakrishnan)