This month marks 40 years since the two countries established formal diplomatic relations under Australia's then-prime minister Gough Whitlam.
The heady and controversial diplomatic days of the seventies were celebrated in Canberra last night.
Correspondent: Martin Cuddihy
Speakers: Liu Yandong, Chinese state councillor; Julia Gillard, Australian Prime Minister
MARTIN CUDDIHY: Celebrating two ancient cultures...
(Sound of Chinese music)
...that have evolved into two modern countries.
At Parliament House last night the diplomatic journey shared by contemporary China and Australia was remembered.
It started with a single step, initiated by Gough Whitlam. He visited China in 1971 and went on to win the federal election the next year.
In December 1972 Mr Whitlam reiterated his intention to become the first Australian prime minister to visit China.
GOUGH WHITLAM (1972): There will be early in October in Tokyo a Japan/Australia ministerial meeting. It would seem appropriate before or after that meeting for me to visit Peking.
MARTIN CUDDIHY: Just one month later Dr Stephen Fitzgerald was appointed Australia's first ambassador to the People's Republic.
At that point there were no Chinese students in Australia and the trade relationship was worth less than $100 million. Today it's valued at more than $100 billion and at last count 167,000 Chinese students were studying down under.
Last night Chinese state councillor Liu Yandong addressed the Great Hall in Canberra.
LIU YANDONG (translated): As we Chinese like to say, when one drinks water you must not forget where it comes from. We should thank the older generation of Chinese and Australian statesmen for their strategic decision 40 years ago, thank the success of generations of leaders for advancing this relationship.
MARTIN CUDDIHY: She told the audience of current and former politicians, diplomats and members of Australia's Chinese community that no-one could have predicted the interwoven links the two countries share.
LIU YANDONG (translated): Back then, even the most optimistic people in our bilateral relationship could not have imagined such historic achievements.
JULIA GILLARD: Gough went to China in 1971 not because it was easy but because it was right.
MARTIN CUDDIHY: Julia Gillard too noted the genesis of the relationship. But she did mention there will be the occasional point of difference.
JULIA GILLARD: Yet we'll always express our disagreement with a sense of proportion and respect. Friends, if this is a night for celebrating a remarkable past it is also a night to look to our future.
MARTIN CUDDIHY: To mark the anniversary Australia and China have signed a memorandum of understanding, aimed at strengthening ties at all levels of the Sino Australian relationship.