Julia Gillard, fourth from left, and Chinese President Hu Jintao, fourth from right, attend a meeting at the Great Hall of the People in Beijing.

Julia Gillard, fourth from left, and Chinese President Hu Jintao, fourth from right, attend a meeting at the Great Hall of the People in Beijing. Photo: AP Photo/Minoru Iwasaki

CHINESE warships could be heading to Australian ports this year after the Prime Minister, Julia Gillard, took "a few small steps" towards military transparency and co-operation with President Hu Jintao.

Ms Gillard told the Herald last night her key meeting with Mr Hu was "friendly in demeanour".

Her inaugural visit to Beijing as prime minister appears to have bookended two years of tensions which began with China's taking umbrage with the 2009 Australian defence white paper, which it believed painted China as a military threat.

Australian Prime Minister Julia Gillard and her partner Tim Mathieson pose for a photograph at the Forbidden City in Beijing April 27, 2011. Click for more photos

Julia Gillard in China

Australian Prime Minister Julia Gillard and her partner Tim Mathieson pose for a photograph at the Forbidden City in Beijing April 27, 2011. Photo: Reuters

  • Australian Prime Minister Julia Gillard and her partner Tim Mathieson pose for a photograph at the Forbidden City in Beijing April 27, 2011.
  • Visiting Austalian Prime Minister Julia Gillard meets with Australian students as she tours the Forbidden City in Beijing on April 27, 2011.
  • Australian Prime Minister Julia Gillard shakes hands with Chinese President Hu Jintao at Great Hall of the People in Beijing on April. 27, 2011.
  • Australian Prime Minister Gillard, left,  shakes hands with Chinese President Hu Jintao at the Great Hall of the People in Beijing, China, Wednesday, April 27, 2011.
  • Australian Prime Minister Julia Gillard and partner Tim Mathieson visit the Forbidden City in Beijing on April 27, 2011.
  • Australia's Prime Minister Julia Gillard arrives at a hotel garden for a media briefing in Beijing on April 27, 2011.
  • Australian Prime Minister Julia Gillard and partner Tim Mathieson visit the Forbidden City in Beijing on April 27, 2011.
  • Visiting Austalian Prime Minister Julia Gillard stands with her partner Tim Mathieson  and a group of Autralian students as she tours the Forbidden City in Beijing on April 27, 2011.
  • Visiting Austalian Prime Minister Julia Gillard tours the Forbidden City in Beijing on April 27, 2011.
  • Australian Prime Minister Julia Gillard talks with Chinese President Hu Jintao at the Great Hall of the People in Beijing on April. 27, 2011.

Western defence analysts are also concerned about the potential for a maritime accident triggering war, given China's increasingly assertive conduct and the absence of the kind of maritime incident protocols that defused incidents between the US and the Soviet Union during the Cold War. Ms Gillard said neither Mr Hu nor the Premier, Wen Jiabao, raised any concerns about Australia's military relationships with the US, or its allies, and nor did she raise concerns about the People's Liberation Army.

Instead, Ms Gillard and Mr Hu yesterday moved to build greater military co-operation including livefire exercises at sea and Chinese warships dock in Australia.

"[We] indicated a preparedness to keep discussing defence co-operation," Ms Gillard told the Herald in an interview last night. "We have indicated we are open to ships visiting Australian ports [and] there's some prospect that there will be some visiting before the end of the year.

"It's a few small steps on a journey to better understanding each other's military perspectives.

''Steps that enable us to better understand methods of organisation, protocols for working, are good things and obviously joint exercising assists with that."

Yesterday chief executives of a dozen of China's biggest resource buyers and investors joined Ms Gillard for lunch at the Australian embassy, where discussion focused on economics, investment and the resource trade.

Guests included Lou Jiwei, the head of China's sovereign wealth fund, which reportedly will soon receive a $US200 billion top-up from the government. Also present were the heads of two of China's biggest oil companies, five of its biggest metals and mining companies and two of its biggest banks.

Ms Gillard said the gathering showed strong interest in building rail and port infrastructure necessary to get Australian mining investments off the ground. They also raised concerns about skills shortages at mines under construction, and red tape at the state level and at the Foreign Investment Review Board.

Today Ms Gillard flies to London to attend the royal wedding.