True. The deeper we look into a scenario, the more complex the outcomes can be.I don’t think that is how a modern blue water navy with a massive para military auxiliary fleet would go about a blockade of Australia though. They would simply declare a blockade and then threaten and board unescorted merchant vessels that chose to defy (I am not suggesting this is a likely event or without risk for China). By analogy: When the RAN participates in blockades it doesn’t lay mines for merchant vessels.
I would view China could enact what you have said with relative ease within the SE China Sea region, and supply lanes in this area would be very problematic. But they would struggle to do this in the open Indian or Pacific Ocean. They have lots of shorter range vessels, but still not much in the long range capability.
My point was that if we move our critical supply lanes to the Indian or Pacific Oceans and out of the SE China Sea, then the the tyranny of distance actually plays to our favour. I recognise this is easier said than done, is expensive, and it still has some risks, but it is a practical approach to reducing an adversary's hold over us in the maritime environment.
I take your point they have sizable auxiliary grey fleets. These can certainly cause problems. But to board a tanker or container ship on the high seas does require a large surface combatant vessel. You can't do this with a fishing boat.