Victoria is standing by its Belt and Road deal with China in the face of frosty bilateral relations and foreign interference legislation.
Premier Daniel Andrews has joined the prime minister in denouncing a gruesome piece of propaganda that has sparked a diplomatic spat.
He discussed the image posted by a Chinese official, which depicted an Australian soldier holding a knife to the throat of an Afghan child, with Scott Morrison on Tuesday.
"That's just beyond the pale, it's wrong, I condemn it," Mr Andrews told reporters in Melbourne on Wednesday.
But asked if he would reconsider the Belt and Road pact in light of its publication, the premier responded: "No."
"I would hope the rhetoric, the commentary, social media posts, comes to an end," he said.
"This relationship is far too important to farmers, to workers, to profits for Victorian companies and therefore prosperity for our state.
"As challenging as it is, as appalling as that behaviour is, we do need to find a way to work through this."
However, the Commonwealth could soon pull the rug out from underneath the Victorian premier.
The Senate is debating new powers to check foreign investment arrangements made by states and universities, such as Victoria's deal with China.
The Morrison government says the changes are about protecting Australia's national security and sovereignty and the vast majority of deals won't be impacted.
Australian Associated Press
