SYDNEY: Relations with China were "back on track", Australia said Tuesday, adding it was optimistic Beijing would behave as a "responsible stakeholder" in global harmony as its power grew.

Foreign Minister Stephen Smith said ties would be tested "from time to time, owing to our different political systems, histories and societies," and problems would arise "whether Australia or China both like it or not."

But he told a forum of business leaders that the two countries had forged through a diplomatically difficult period by agreeing to disagree "on the basis of mutual respect."

"The fact that bilateral relations are now seen to be back on track indicates that both sides have been and are committed to dealing with difficult issues in a straightforward and constructive way," Smith said.

Tensions between the major trading partners flared last year over the arrest of Rio Tinto executive and Australian passport holder Stern Hu in China and a visit to Australia by exiled Uighur leader Rebiya Kadeer.

Smith said Australia would maintain an interest in issues such as human rights as China's economic and strategic influence grew.

"This (influence) inevitably brings with it greater expectations of China taking up a commensurate share of responsibility as a good international citizen," he told the Australia-China Business Council.

"We are optimistic that China will emerge into a harmonious world as a responsible stakeholder," added Smith.

The comments follow Trade Minister Simon Crean's warning this week that Beijing should act as a market economy and keep out of fraught iron ore price talks between global mining companies and state-owned steel mills.

China vowed Tuesday to support its mills in the thorny negotiations, in defiance of Crean's blunt advice.