Labor's defence spokesman Stephen Conroy has called for the Royal Australian Navy to directly challenge China  after an international court ruling Beijing's claims to the South China Sea to be invalid.

But Mr Carr backed the statements of Prime Minister Malcolm Turnbull and Foreign Minister Julie Bishop as the best response to avoid escalating regional tensions.

"The plain fact is if Australia joined American patrols or ran patrols of its own that penetrated the 12-mile radius of Chinese-claimed territory, we would be the only American ally to do so," Mr Carr told Fairfax Media.

The United States has previously dispatched warships to sail past territory occupied by China in so-called "freedom of navigation" exercises to demonstrate it does not recognise control of the waters.

Mr Turnbull accused Senator Conroy of escalating tensions, while Labor leader Bill Shorten has said Australia should conduct military exercises to support the ruling but not said how close ships should sail.

China has denounced the ruling in the arbitration case brought by the Philippines as "null and void" and threatened to impose controls on aircraft over the disputed waters.

The territorial dispute has escalated in recent years after China seized control of coral atolls and tiny islands in waters claimed by the Philippines, dredging the sea floor to reclaim land and construct aircraft runways, which could serve as military bases.

Speaking from Beijing, Mr Carr said a diplomatic course was more likely to find a solution.

Asked about Senator Conroy's comments, Mr Carr said Bill Shorten and shadow foreign affairs spokeswoman Tanya Plibersek had shown "realism" by supporting the diplomatic path.

"If our response to the arbitration were to immediately signal patrols that mimicked the American patrols, Australia would be one out among all American partners in the region. We'd look like the deputy sheriff," he said.

Mr Carr, now head of the Australia China Relations Institute at the University of Technology in Sydney, has been said to have a compromised position towards Beijing, with the institute granted $1.8 million from a Chinese businessman.

But Mr Carr said private donations was no different to those received by other Australian think tanks.

"I'm happy to have us judged by the quality of the research we've commissioned and the [opinion articles] we've written," he said.