China has been at the forefront of a major defence conference overnight, which heard a startling claim the country has more than 1200 spies operating in Australia.

Deputy Prime Minister and Defence Minister Richard Marles attended the Defending Australia Summit in Canberra alongside military leaders.

He acknowledged the increased anxiety felt in the Pacific region about China’s recent military drills off Taiwan and said the emerging superpower’s big defence build-up “presents challenges” for Australia.

Marles also admitted the federal government wants to keep a strong relationship with China.

“We want to have the most productive relationship with China that we can have. I mean, they remain our largest trading partner, but when we talk about working with them when we can, but disagreeing where we must, that mantra is about trying to reconcile the challenges that we face in stabilising the relationship with China,” he told the forum, organised by The Australian newspaper.

Marles also reaffirmed the AUKUS pact – under which Australia will acquire nuclear-powered submarines – is essential to the nation’s defence strategy.

In his speech, he announced the government has “determined the design partners” for the building of submarine construction yards in South Australia.

The project is expected to create 4000 direct jobs at the peak of construction, with a further 4000 to 5500 direct jobs set to build Australia’s nuclear-powered submarines.

The conference also heard a startling claim by a former spy that China has more than 1200 intelligence agents currently operating in Australia.

He claimed the Chinese spies were collecting information, surveilling and harassing targets for the communist regime.

An interpreter who was meant to help him as he spoke quit moments before the conference out of fear he would speak negatively of the Chinese government.