Prime Minister Anthony Albanese has met informally with Chinese Premier Li Keqiang at a gala dinner for world leaders.
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It's a significant development as work continues behind the scenes to secure a meeting with Chinese President Xi Jinping.
The dinner was hosted by King of Cambodia Norodom Sihamoni and Prime Minister Hun Sen, for leaders attending the East Asia and ASEAN summits in Phnom Penh.
Mr Albanese and the premier were seated near each other at the head table and had a brief conversation.
It was the first time he's met Premier Li and the pair spoke about the 50-year anniversary of diplomatic relations between their two countries.
Mr Albanese was seated next to Indonesian President Joko Widodo at the gala and also spoke to US President Joe Biden, Canadian Prime Minister Justin Trudeau and Japanese Prime Minister Fumio Kishida.
Trust, communication and collaboration have been at the heart of Mr Albanese's approach to meetings with his fellow world leaders.
He has committed to upholding the ideals of peace and freedom and said that would be done by building trust among nations.
But China's sanctions on Australia and security muscle-flexing in the region are key issues the prime minister is wanting to tackle.
Mr Xi, who has not had a formal meeting with an Australian leader since Malcolm Turnbull in 2016, has confirmed he will meet with Mr Biden in Bali.
Whether he and Mr Albanese will do so remains an open question.
"Dialogue is a good thing. Out of dialogue comes understanding and we need more, not less, in today's world," Mr Albanese said.
"We know there's strategic competition in this region and that's the context of any meeting that will take place between the United States and China."
It comes as Australia strengthened a free trade agreement with ASEAN and New Zealand.
The upgrade of the agreement will allow for Australian businesses to expand their engagement with southeast Asia, while also encouraging greater cooperation on climate change and renewable energy,
"Strengthening trade agreements with ASEAN and New Zealand will mean better outcomes for Australian business and Australian families," Mr Albanese said.
"Today we open an ambitious new chapter for the growing economic relationships between ASEAN, Australia and New Zealand, in line with my government's commitment to deepening engagement in southeast Asia."
Mr Albanese said he was waiting for the finalisation of a meeting with Mr Xi and he looks forward to having a constructive dialogue.
"I think there is a great deal of goodwill here, certainly from Australia," he said.
"I have no reason to think there's not goodwill on the Chinese side as well."
On Sunday the prime minister is expected to give two speeches at the summits and later tour an exhibition in Phnom Penh with other world leaders.
"This is a chance for us to build relationships in our region so early in the term of the new government," he said.
"I'm very pleased that it's so constructive and the dialogue is so positive."
It will be the prime minister's final day in Phnom Penh before he travels to Bali for the G20 summit.
Australian Associated Press
