Prime Minister Julia Gillard has encouraged China to open up its economy further and drive social reform, citing Australia's own journey to modernise.
Ms Gillard was speaking to Chinese executives in the Pudong financial district of Shanghai, on the third day of her six-day visit to China.
"The growing importance of China's domestic and social reforms - like strengthening health care and expanding social security - will denote a growing importance for local and provincial leadership," she told the China Executive Leadership Academy on Monday.
"This has long been vital to your social and human development.
"In coming decades, it will be vital to balancing and sustaining national economic growth - vital to national success."
Ms Gillard earlier on Monday announced a new agreement with Beijing which will allow direct trading of Australian and Chinese currencies for the first time.
"This reflects the rapid growth of our bilateral trade and the value of two-way investment," she said.
The Prime Minister referred to the determination of China's leadership to deliver reform benefits.
"All of you as leaders in China are living through a considerable transition," she said.
Ms Gillard pointed to Australia's experience in taking difficult but necessary steps to modernise its economy by floating the Australia dollar, cutting tariffs and opening up its financial sector to foreign competition. "Australia is a stronger, fairer, smarter nation as a result," she said.
Ms Gillard was asked about the foreign investment debate, after Nationals senator Barnaby Joyce said not all investment by China was in the national interest.
She defended Australia's foreign investment. "We are a capital-hungry economy. We need inwards investment," Ms Gillard said.