It comes after Prime Minister Scott Morrison confirmed Australia will not send government officials to the Games in February amid worldwide concerns about China's human rights abuses.
The US-led diplomatic protest, sparked by accusations that Beijing's repression of millions of minority Uyghurs Muslims amounts to genocide, has already been joined by a growing list of countries, including New Zealand, the UK, and Scotland.
But Australia's declaration was perceived as yet another blow in its already-frayed relationship with China, igniting a brutal war-of-words as tensions escalate.
Beijing has issued a warning to Australia after it announced it would join allied forces in a US-led diplomatic protest against China's human rights abuses by boycotting the nation's Winter Olympics
A spokesperson for Chinese President President Xi Jinping said Beijing had lodged 'solemn representations' - a term meaning diplomatic discontent - in the wake of Mr Morrison's announcement, The Australian reports.
However, Mr Morrison said China's trade coercion, reaction to AUKUS, and human rights record meant his decision should have been 'not surprising'.
'I think [any economic retaliation] would be completely and utterly unacceptable, and there’d be no grounds for that whatsoever,' the Prime Minister said on Wednesday.
'I’ll always stand up for Australia’s interests and what Australians believe is right, and we are living in an uncertain time. I’m doing it because it’s in Australia’s national interest. It’s the right thing to do. Full stop.'
In response, Chinese Foreign Ministry spokesman Wang Wenbin said Australian officials had never been invited to the Games and were engaging in 'political manipulation'.
'No one will care if they come or not. [It] shows the hype will not have any impact on Beijing’s success in hosting the Winter Olympics,' Mr Wang said at a Chinese Foreign Ministry briefing on Wednesday night.
Scott Morrison (pictured) on Wednesday confirmed Australian government officials would not be sent to the Games when they kick off in February
'It also fully exposes that the Australian government has blindly followed individual countries.'
Asked what counter action would be taken, Mr Wang said Australia and the United States would 'pay a price'.
'We have already stated that the US will pay a price for its wrong moves. Just wait and see,' he said.