* RBA expected to hold cash rate at 0.1% - Reuters poll

* Westpac falls on allegations of liquidity standards breach

* Santos upgrades 2020 production view, shares up 1.5%

Dec 1 (Reuters) - Australian shares on Tuesday clawed higher from a sharp decline in the previous session, though rising tensions with largest trading partner China kept gains in check as investors awaited the central bank's decision on benchmark rate.

The S&P/ASX 200 index was up 0.3% at 6,537.5 by 2350 GMT. The benchmark index closed 1.3% lower on Monday, but posted a record monthly gain of nearly 10%.

The Reserve Bank of Australia is expected to hold its cash rate at a historic low of 0.1% at its monthly policy meeting later in the day, according to a Reuters poll.

The decision comes a day ahead of the third-quarter gross domestic product data, which is expected to show a 2.5% growth in the economy in September quarter, a rebound from a record 7% contraction in the previous quarter, according to a Reuters poll.

Limiting gains in the index were tensions between Canberra and Beijing that flared after Australian Prime Minister demanded an apology from Beijing over a fake image posted on social media of an Australian soldier holding the knife to the throat of an Afghan child.

Relations between the two trading partners were already at a low following the imposition of anti-dumping tariffs by China on Australian wine imports.

Healthcare firms were the top boost to the index, with CSL Ltd and Cochlear jumping 2% and 2.6%, respectively.

Financials were among the top drags on the benchmark, with Westpac slipping as much as 1.2% after country's prudential regulator said the bank breached liquidity standards over the past two years.

Most blue-chip energy stocks declined amid a drop in oil prices, though Santos gained up to 1.5% after the gas producer raised its 2020 output forecast and lowered production cost expectations.

In New Zealand, the benchmark S&P/NZX 50 index was down 0.4% at 12,715.94, with financials weighing the most.

(Reporting by Sameer Manekar in Bengaluru, Editing by Sherry Jacob-Phillips)