Canberra and Washington have both denied since there are any plans for northern Australia to host bombers or surveillance aircraft, insisting Assistant Defence Secretary David Shear "mispoke" when he said it was part of a strategy to counter Beijing's aggression in the South China Sea.
However, the Chinese government has expressed concern about the comments in response to questions from The Australian Financial Review.
"Any defence co-operation between countries should not harm the interest of the third country," Hong Lei, spokesman for the Foreign Ministry, said.
"It is China's stand that co-operation between countries should promote the peace, stability and prosperity of Asia Pacific area and it should be carried out in a constructive way."
The comments suggest Beijing will watch any future defence agreements between Australia and the US closely, particularly because they have been linked now to Beijing's actions in the South China Sea, where it is locked in a series of territorial disputes with neighbouring countries. China claims the bulk of the South China Sea as its territory and has been building a string of man-made islands, including airstrips, on contested reefs.
The US has stepped up its demands in recent weeks for China to stop these construction projects and flagged plans to increase surveillance. China responded by urging the US to clarify its position.
Following a meeting with US Secretary of State John Kerry on Sunday, President Xi Jinping said: "The broad Pacific Ocean is vast enough to embrace both China and the United States."
However, tensions are likely to remain high if China continues to build the islands or the US increases its patrols of the area.
Now Australia has been dragged into the dispute, even though Prime Minister Tony Abbott distanced the government from any plan to host the bombers.
Mr Hong noted the recent upgrading of the bilateral relationship to a "strategic partnership" in his response, saying: "At present, the relationship between China and Australia has sound development.
"We would like to join hands with Australia to fulfil the important consensus reached by the leaders of the two countries and to further promote the strategic partnership between China and Australia."
A senior colonel with the Chinese Navy, who preferred not to be named, said the US was like a "puppet master" attempting to pull the strings and that Australia and the Philippines were the puppets.
However, he doesn't believe Australia will jeopardise its relationship with China.
"Australia is a country that understands the situation and we saw them join the Asian Infrastructure Investment Bank," he said. "They don't necessarily do whatever the US wants."
He said Canberra might try to use this to gain bargaining power with China.
"Australia is clever enough not to make China an enemy. Their strategy is to please both sides and that's their only choice."
Shi Yinhong, director of Renmin University's Centre for American Studies, said it was well known that Australia and the US were military allies.
"It is possible that they could increase military co-operation but I don't think the possibility is very high at the moment," he said. "Australia has been very cautious in handling this matter."
Australia and the US have been involved in talks to increase warplane and warship visits, along with hosting more Marines, since the Obama administration's pivot to Asia in 2011 to counter the rise of China.
In a speech on the Obama pivot in 2012, US Defence Secretary Ashton Carter made clear Washington's intentions to rotate more long-range strategic bombers through Australia.
Mr Carter, who was then a deputy secretary, said Washington's intention was to rotate through Australia the types of long-range bombers the US deployed to Guam.
"We are working with Australia to establish a rotational bomber presence, building on the success of bomber rotations to Andersen Air Force Base in Guam," he said at the time.
As part of the pivot, B2 Stealth bombers and B-52s rotate through Guam to provide a continuous bomber presence in the region.
B52s from Guam also took part in Australia's Exercise Talisman Saber in 2009 and again in 2011. It is an exercise that involves up to 10,000 Australian land and naval forces and up to 20,000 US troops.
B1 bombers also visit Guam. The B1 has the advantage of long range and supersonic speed and the ability to drop more conventional bombs than the other two aircraft, but the B-52 and the B2 Stealth bomber are both still capable of carrying nuclear armaments.
Australian Strategic Policy Institute analyst Dr Andrew Davies said it was "not surprising the US was seeking to expand rotations of long-range bombers through Australia, given there is a competitor in north Asia".
"After all, that is how the US conducted the war in the Pacific [in the 1940s] when there was another competitor in north Asia – Japan," Dr Davies said.
US strategic analyst Bonnie Glaser said China was not trying to supplant the US as the dominant power in the Asian region but did want to weaken its alliances and was relying on economic incentives to do this.
She said during a visit to Sydney that President Xi Jinping's grand strategy involved trying to make the surrounding environment more favourable to China's interests.
"China expects other countries will take China's security concerns into account," said Ms Glaser, of the Washington-based Centre for Strategic and International Studies.