China calls for new era with Australia after crisis

China on Friday called for a sweeping new era in ties with Australia including a free-trade deal, marking a dramatic turnaround in relations which reached crisis-point this year.

Visiting vice premier Li Keqiang vowed to work for the long-awaited free-trade agreement and urged a "new level" in contacts beyond massive, multi-billion dollar iron ore and coal exports.

"We should seize and look at the general picture and we should ensure our bilateral relationship is brought to a new level and greater depth consistently," Li told the Australia-China Business Council.

Li, widely tipped as China's next premier, is his country's most senior official to visit since the arrest of an Australian passport-holding mining executive shattered relations in July.

He spoke glowingly of ties with Australia, citing "enormous" development opportunities and calling for greater people-to-people contacts between the two countries.

"China and Australia have extensive common interests and a solid basis for cooperation in many areas," he said, adding "the bilateral relationship has become more strategic in nature."

Chinese media were incensed in June when Anglo-Australian miner Rio Tinto snubbed a huge cash injection by state-run Chinalco. Weeks later, senior executive Stern Hu was arrested and charged with industrial espionage.

Australia and China also clashed over a visit by exiled Uighur leader Rebiya Kadeer and over a documentary about her life which Beijing tried to have withdrawn from the Melbourne film festival.

Prime Minister Kevin Rudd was expected to raise Hu's plight in talks with Li later. Li, who departs on Sunday, has already signed agreements on forestry, education, telecommunications and cultural relics.

Chinese ambassador to Australia Zhang Junsai was also upbeat, saying relations with Canberra were "facing a new starting point."

"I believe it will enter a new phase through joint efforts in boosting cooperation," he told the official Xinhua news agency.

Two-way business hit 74 billion dollars (67.7 billion US) last year and is averaging 22.5 percent growth over the last five years, putting China on course to outstrip Japan as Australia's top trading partner.

In August, PetroChina and ExxonMobil struck the biggest deal in Australia's history, worth 50 billion Australian dollars, to supply liquefied natural gas over 20 years from a major new plant in Western Australia.

Yanzhou Coal's 3.5 billion Australian dollar bid for Felix Mining was approved by Australian regulators last week, clearing the way for China's biggest ever Australian takeover.

And on Friday, Australia's Foreign Investment Review Board also approved Chinese giant Baosteel's 286 million dollar offer for a 20 percent stake in local miner Aquila.

John Lee, research fellow at Sydney's Centre of Independent Studies, said Li's visit showed Australia's importance to China, which relies on its resources to fuel its breakneck growth.

He added that China was also trying to make amends for the Hu saga, which had gone down as a "diplomatic blunder" in Beijing.

"Australia actually has a lot more leverage over China in trade relations and their diplomatic relations than we sometimes give ourselves credit for," Lee told AFP.

"We're really talking about the ongoing story. I think Beijing tends to act fairly impulsively, then realise it's made a mistake, wait a while to save face and then find a way to make amends."