Foreign Minister Stephen Smith said ties would be tested "from time to time, owing to our different political systems, histories and societies," and problems would arise "whether Australia or China both like it or not."

But he told a forum of business leaders that the two countries had forged through a diplomatically difficult period by agreeing to disagree "on the basis of mutual respect."

"The fact that bilateral relations are now seen to be back on track indicates that both sides have been and are committed to dealing with difficult issues in a straightforward and constructive way," Smith said.

Tensions between the major trading partners flared last year over the arrest of Rio Tinto executive and Australian passport holder Stern Hu in China and a visit to Australia by exiled Uighur leader Rebiya Kadeer.

Smith said Australia would maintain an interest in issues such as human rights as China's economic and strategic influence grew.

"This (influence) inevitably brings with it greater expectations of China taking up a commensurate share of responsibility as a good international citizen," he told the Australia-China Business Council.

"We are optimistic that China will emerge into a harmonious world as a responsible stakeholder," added Smith, expressing confidence in Beijing's "full and constructive participation in the global community" in the future.

The comments follow Trade Minister Simon Crean's warning this week that Beijing should act as a market economy and keep out of fraught iron ore price talks between global mining companies and state-owned steel mills.

China vowed Tuesday to support its mills in the thorny negotiations, in defiance of Crean's blunt advice.

Crean also addressed Tuesday's forum, saying that last month's resumption of stalled free trade talks showed goodwill on both sides, describing it as a "positive re-engagement" reflecting momentum at the highest diplomatic levels.

"Of course, many difficult and sensitive issues remain to be resolved," he said, singling out agriculture, resources, services and investment as stumbling blocks.

"We are continuing to push China to open up investment in areas that are currently protected, including mining, telecommunications, and financial, legal and education services," he added.

Two-way trade was worth 83 billion dollars (76 billion US) last financial year -- a 30 percent increase on the previous year -- and Crean said Australia was one of very few countries to enjoy a trade surplus with the Asian giant.

China's demand for Australian resources had helped it stave off the worst of the global financial crisis by supporting coal and iron ore exports at a time when the commodities market was weak, he said.

"It is in Australia's interest to ensure that the trade relationship with China continues to deepen and become more open," he added.

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