Prime Minister Julia Gillard has personally driven negotiations to secure an unprecedented agreement with China to hold an annual round of formal leaders discussions.

In doing so, Australia has beaten most other countries in the world by securing the agreement just weeks after China's new leadership team took office.

Ms Gillard and new Chinese premier Li Keqiang formally agreed to the partnership at a meeting in Beijing.

The annual talks will feature the Prime Minister, the Treasurer and the Foreign Minister in face-to-face gatherings with their Chinese counterparts.

Ms Gillard said the new partnership was "a big step forward" and would build on the existing level of cooperation.

"It's a step forward for us as a nation. It's important to peace, stability, the ability to talk about those things, the ability to talk about our economic relationship in a structured dialogue every year," Ms Gillard said.

Some see the agreement as potentially the greatest single leap in relations for the two countries since diplomatic recognition back in 1972.

China only has this type of yearly dialogue with Russia, Germany, Britain and the EU.

"We should set an ambitious goal - a level and structure of dialogue which Australia shares with only a handful of countries, and one which China also shares with only very few nations," Ms Gillard said.

"Right around the world countries are competing for China's attention. They want to come to China and be heard. They want their issues to be right there at the forefront of thinking in China. That's understandable as this great power continues to rise.

"What we have secured ... is a structure that says we'll be there at the table."

The deal has been in the works for more than a year following personal letters between Ms Gillard and former president Hu Jintao and phone calls to current premier Mr Li.

"We knew that we would see the leadership change in China, and there were certain formal processes that needed to go through as the leadership changed," Ms Gillard said.

"And in the very short window between the formal change of leadership and this visit, I spoke to the premier by telephone."

In the bi-lateral meeting the premier remarked on the previous meetings he had held with Ms Gillard.

"I believe every time we've met we've boosted Australia-China relations," Mr Li said through a translator.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 15 minutes 17 seconds 15 m Agreement a milestone in relationship, says Bob Carr

Foreign Minister Bob Carr hailed the new agreement as a milestone in the countries' relationship.

Senator Carr said Australia will benefit from a formal avenue for consultation between the two countries.

"It gives it a tremendous momentum, a tremendous impetus," he said.

"It means that each year our public servants, our whole bureaucracies, our business, our public know that there will be a meeting between the senior leadership of both our countries and that brings forward the whole process of decision making on trade, on visas, on investment.

"This really does rate as a milestone in the development of this relationship since Gough Whitlam in 1972."

Opposition Leader Tony Abbott has also welcomed the annual leadership talks.

He says the relationship between the two countries has been somewhat neglected.

But he has told commercial radio in Melbourne it is good Ms Gillard is now making an effort to put it back on a sound footing.

"When I was in Beijing last July I very strongly urged that there be an annual leadership dialogue at the top level of business and politics between Australia and China, and it seems that idea is coming to fruition," he said.

Other political forces have also chimed in, with former Liberal prime minister Malcolm Fraser tweeting his support of the Government's announcement.

"Gillard lands a big one with China deal. A good and necessary visit, congratulations," he tweeted.

Strengthening military ties

The new agreement does not include ministerial discussions on defence matters, but Ms Gillard says Australia and China already share a close relationship with regular discussions.

"We have a standing dialogue ... a military-to-military dialogue, there will also be a policy-level dialogue which will happen between our military, so this is all about building trust and confidence and transparency for the future," Ms Gillard said.

The talks did not canvass a suggestion Ms Gillard had put forward earlier in the day for China and Australia to consider conducting military exercises in conjunction with the US, but Ms Gillard has made it clear the Government considers pursuing joint defence exercises through aid, development and disaster response a more feasible prospect.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 3 minutes 27 seconds 3 m 27 s Naomi Woodley reports from China Download 1.6 MB

An agreement was signed between the Prime Minister and premier for greater cooperation on the delivery of aid in the Asia-Pacific.

"Working on the shared challenges of development in our region where too many people die of preventable causes and we've seen things like drug-resistant malaria," Ms Gillard said.

There will, however, be a new round of discussions between the Department of Defence, and China's People's Liberation Army, and a joint military friendship and culture week.

The Prime Minister had also nominated closer cooperation on climate change as a priority, and she and Mr Li have agreed to set up a joint experts group to share information on carbon markets.

"These outcomes will well and truly build the truly comprehensive relationship we envisaged in the ... Australia in the Asian Century white paper," Ms Gillard said.

On top of the announcement earlier in the week of a tourism and trade fair to be held in Shanghai next year, the Government is also intending to make it easier for Chinese visitors to move through Australian airports.

From 2015 there will be a trial of allowing Chinese e-passport holders to use the SmartGate system, which is currently only available to Australian, New Zealand, and US passport holders.

There is also a new memorandum of understanding to drive cooperation on controlling the use of chemicals which can be used to make illicit drugs.

Ms Gillard also emphasised that Chinese investment in Australia was very welcome.

"The diversifying relationship between our two economies and the growing connection between our two peoples go hand in hand," she said.

"There is clear potential for expanded Chinese investment in Australia, and I am confident that this will continue to grow.

"Leaders on both sides must be confident we have the right structures to guide the decisions we need to make in coming years.

"Right now, I don't believe we do."

Education exchange

Ms Gillard's well-known passion is education and on her final full day in China she made time to visit the Chenjinglun high school in downtown Beijing to talk to students.

A former education minister, the Prime Minister later emphasised the importance of education exchanges as she made the keynote speech at a lunch hosted by Australian business representatives.

"We also see a lot of Chinese students come and study in Australia. The single biggest grouping of students studying in Australia is from China," she said.

"As part of Australia's national plan for school improvement, all our schools will engage with at least one school in Asia, taking advantage of our national broadband network.

"All Australian students will have access to at least one priority Asian language, including Mandarin."