Chinese Premier Li Keqiang and Australian Prime Minister Julia Gillard agreed Tuesday to hold annual prime ministerial meetings, as Chinese money drives Australia's huge resource boom.

Li and Gillard held talks at the ornate Great Hall of the People in Beijing, where the visiting leader was greeted with full military honours including cannon fired from nearby Tiananmen Square.

Australia's economy has benefited from Chinese demand for resources including iron ore, and China is now its largest trading partner with two-way business in goods and services worth Aus$128 billion (US$134 billion).

"Our two sides have decided that the prime ministers will have regular annual meetings either in a bilateral format or on multilateral occasions," Li said, adding that Tuesday's talks could be "regarded as the annual meeting mechanism".

Gillard congratulated Li on his selection last month as premier.

"I am filled with optimism about the way we will be able to work together to take the relationship between our two countries forward," she said.

Australia, which has a long-standing military alliance with the United States, also engages in defence cooperation with China, with which it has conducted live-fire naval exercises.

On Sunday, Gillard met President Xi Jinping at an annual conference of political and economic leaders on the southern island of Hainan.

Cultural exchanges are also growing. China provides the greatest number of overseas students to Australia with 150,000 enrolments in 2012, and the second largest source of overseas visitors -- 626,000 last year.