China has moved weaponry onto artificial islands that it is building in contested areas of the South China Sea, adding to the risks of a confrontation with the United States and its regional security partners including Australia.

Australian officials are concerned that China could also introduce long-range radar, anti-aircraft guns and regular surveillance flights that will enable it to project military power across a maritime expanse which include some of Australia's busiest trading lanes.

Fairfax understands that these concerns are prompting discussions in senior military circles that could lead to Australian naval officers and air force pilots embarking on "freedom of navigation" missions to demonstrate that Canberra does not accept Beijing's hardening claims.

The options, which include fly-throughs, sail-throughs and exercises involving various regional partners, are expected to crystallise after officials deliver a personal briefing to Prime Minister Tony Abbott during the next fortnight.

Already, diplomats have dropped "talking points" about Australia not taking sides in the multi-layered territorial contest, which Chinese officials have used as evidence of Australian support.

More substantially, Australia's intelligence agencies are upgrading the strategic threat assessments which will inform the Abbott government's first Defence White Paper, according to government sources. Late on Wednesday, Australia's top defence official, Dennis Richardson, brought Canberra's growing concerns into public view by telling a Sydney forum that China's "unprecedented" land reclamations raise questions of "intent" and risks of "miscalculation".

"It is legitimate to ask the purpose of the land reclamation – tourism appears unlikely," said Mr Richardson, delivering the annual Blamey Oration at the New South Wales state Parliament.

"Given the size and modernisation of China's military, the use by China of land reclamation for military purposes would be of particular concern," he said.

The Defence Secretary's comments were the most detailed and forthright from a senior Australian official since China began building its audacious network of airstrips, deep-water ports and other military-capable infrastructure on previously submerged reefs in the Spratly Islands last year.

China says the new sand islands will be used for humanitarian, environmental, fishing and other internationally-minded purposes.

But it warned this week in its own Defence White Paper that it would gradually expand "offshore waters defence" to include "open seas protection", adding that it would not tolerate other countries "meddling".

In Canberra, Fairfax understands that China's frenetic building activity has prompted the Defence Intelligence Organisation and Office of National Assessments to adopt a more hawkish tone since they each delivered major strategic threat assessments to the National Security Committee of Committee (NSC) mid-last year.

Their revised strategic assessments, due to be submitted to the NSC in coming weeks, will show how the reclamations could enable China to greatly amplify threats of coercive force in order to play a gate-keeping role across hotly-contested maritime areas, if left unchecked.

What Australia should do about the challenge is a more difficult question.

Australian military officers and officials have discussed a need to demonstrate that they do not recognise any 12-mile territorial zone or more expansive economic zone that China may unilaterally claim around its freshly-minted islands. But they are grappling with the need to avoid inflaming a potential confrontation Australia's largest trading partner.

Last week the United States demonstrated its position with a flyover by a P-8 surveillance plane, which carried a CNN journalist.

The voice of an Australian can be heard over the aircraft's radio.

Senior officers and officials have speculated that Australia could join a humanitarian or military exercise with the United States or one of several regional partners including Japan, Malaysia and Singapore.

Such a move has been discussed in Washington and key capitals in the region but no proposal has yet been put to Canberra, it is understood.

It could also dispatch naval vessels or air force planes through a contested area on route to a routine destination.

Officials say that any such "demonstration" is likely to be conducted with minimal publicity, to avoid inflaming China's reaction.

Mr Richardson, in his Sydney address to the Royal United Services Institute, said the area of previously-submerged atolls that China has reclaimed in the past year is nearly four times as large as that which the five other claimant states have achieved over several decades.

And he critiqued the nebulous nature of China's claims which, on some readings, cover more than 80 per cent of the entire South China Sea.

"It is not constructive to give the appearance of seeking to change facts on the ground without any clarification of actual claims," he said.

"It is legitimate to raise such questions and express such concerns because tensions and potential miscalculations are not in anyone's interest."