The federal government has said the action of the Chinese J-10 jet, which launched the flares directly ahead of the Seahawk helicopter, was unprofessional and unsafe.
But China's Ministry of National Defence spokesman Senior Colonel Zhang Xiaogang said HMAS Hobart sent the helicopter up three times to conduct "close-in reconnaissance and disturb the normal training activities of the Chinese side".
China responded with a "vocal warning" before taking "legitimate, reasonable, professional, and safe operations to expel it", he added, while making a statement late on Tuesday Beijing time.
"We urge the Australian side to truly respect China's sovereignty and security concerns, cease spreading false narratives, strictly constrain the operations of its naval and air forces, stop all dangerous provocations, and avoid undermining the overall relationship between the two countries and the two militaries," he said.
But Australian naval expert Jennifer Parker disputed the claim, saying defence was unlikely to send a helicopter to monitor drills when satellite-based capabilities would be more effective.
"It would be highly unlikely for an Australian ship helicopter to provoke China like this during a naval exercise for limited to no benefits," she told the ABC.
The flares were dropped about 300 metres in front of the chopper and about 60 metres above it.
The helicopter was unaffected and all the crew were safe after it took evasive action.
HMAS Hobart was commissioned at a ceremony at Fleet Base East in Sydney in 2017. (David Moir/AAP PHOTOS)
China's foreign ministry spokesman Lin Jian initially condemned Australia's actions as a "provocative move" before the defence spokesman made his statement.
There is "no evidence" to support China's claims, opposition home affairs spokesman James Paterson said.
"Even if we were in - hypothetically - China's exclusive economic zone, this would still be an utterly unacceptable, intimidatory and coercive thing to do and we would never accept it," he told Sky News on Thursday.
Prime Minister Anthony Albanese has not directly responded to the spying claims, but has said there was "no question" that defence was operating in international waters and airspace.
Australia has also said the navy aircraft was taking a routine flight and operating from HMAS Hobart in the Yellow Sea, as part of an international effort to enforce United Nations sanctions on North Korea, when the incident took place about 7.30pm on Saturday.
HMAS Hobart is a guided missile destroyer and carries a helicopter for surveillance and to support key warfare areas, according to the Navy website.
In November, Australian navy divers from HMAS Toowoomba were injured after a Chinese warship issued sonar pulses.
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