But the Chinese Premier has insisted the two countries should "change, maintain, and develop" ties, nearly three years after their relationship deteriorated.

The Prime Minister became the first Australian leader to hold a face-to-face meeting with his Chinese counterpart in half a decade, as the pair met on the sidelines of the G20 Leaders' Summit in Bali on Tuesday evening.

Mr Albanese accepted Canberra and Beijing had been at odds during three years dominated by an assertive Chinese presence in the Pacific, fears of conflict in Taiwan and significant sanctions on Australian products.

Speaking directly to President Xi at the beginning of the meeting, Mr Albanese stressed the need for a "stable, prosperous, and peaceful Indo-Pacific" governed by the rule of international law.

"We have had differences, and Australia won't resile from our interests or our values," he said.

"But our bilateral relationship is an important one. Both sides have worked to stabilise the relationship based upon mutual respect and mutual benefit."

President Xi congratulated his new counterpart on his May election victory, saying relations with Australia had "always been at the forefront" of China's outlook and should be "cherished".

"In the past few years, the China-Australia relationship has [had] some difficulties," he conceded.

"This is something that we would not like to see. Since China and Australia are two important countries in the Asia-Pacific region. We should change, maintain and develop our relationship.

"This is in the fundamental interests of the people from both countries."

The talks marked a significant shift from three years in the diplomatic freezer, after a wave of Chinese sanctions in retaliation for Australia's push for an independent inquiry into the origins of COVID-19.

Human rights groups are urging Mr Albanese not to "shy away" from abuses in China, including the long-term detention of Australian citizens.

But experts are pouring cold water on the prospect of progress in the short-term, framing the meeting as more "a testing of the waters" than a watershed moment.

Arriving at the summit on Monday evening, Mr Albanese said it was in both countries' interests for tensions to thaw.

"We need to cooperate with China where we can. We'll disagree where we must, but we'll act and have dialogue in our national interest. Dialogue is always constructive," he said.

Michael Shoebridge, director of Strategic Analysis Australia, said the talks may flag a "limited" improvement in the relationship, but any immediate reversal was "not going to happen".

"Giving Albanese the blessing of being able to be in Xi's presence is what the Chinese want to portray as a gift in and of itself," he said.

"I think the implied price of this meeting ... is silence, and preferably letting them just get on with business in the South Pacific."

President Xi was facing mounting domestic problems, and Mr Shoebridge said he was attempting to take "heat, light, and noise" out of his international relationships.

"This approach to Australia has run its course. But by having the meeting, he's rebuilt the card of turning meetings off again," he said.

Mr Shoebridge said Chinese tariffs, worth around $20 billion, should serve as a warning in the long-term, however "cheered up" the business community would be by Tuesday's meeting.

"The dumbest possible thing to do is to pretend that the last five years didn't happen. We've been hit over the head once," he said.

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Human rights groups have urged Mr Albanese to raise human rights abuses in China, including the abuse of the Muslim minority Uyghur population, and the detention of journalist Cheng Lei and author Yang Hengjun, both Australian citizens.

Phil Robertson, the deputy director of Human Rights Watch's Asia Division, said the Prime Minister also must not avoid "tough issues", including "issues of Chinese influence in Australia".

"It can't just be about trade. It has to be about rights and values. Ultimately, the sustainability of these kind of supply chains, the ability of countries to get along and operate interactively together, also depends on issues of values and rights," he said.

"Australia should not shy away from being very clear about what it thinks about what China has done at various times in Australia, as well as some of the issues that are happening inside China."

But Ric Smith, former ambassador to China, warned the government against following a media "inclination" to discuss the detention of Ms Lei and Mr Hengjung as a human rights issue.

"They will have to be approached as consular cases. That's where we have a standing, when ... pursuing them in that light," he said.

Mr Smith said Beijing was responding to a "change of tone" in Canberra since the May election, after escalating rhetoric under the Coalition.

He described Tuesday's meeting as "a testing of the waters on both sides", in which President Xi will size his new counterpart up.

"They want to understand where we're coming from, and how deeply committed we are to sort of hostile positions that have been expressed in the past," he said.

"In the course of that, they want to make a judgement about how genuine we are. Are we just going through the motions, or are we interested in doing a bit of rebuilding?"

Mr Smith said while Australia must reduce its reliance on China, he warned "decoupling" fully from its largest trading partner was impossible.

"[But] I wouldn't be looking for runs on the board immediately from it ... The best you can hope for is that they'll agree that ministers should meet and talk about trade [and] consular issues," he said.

Announcing the meeting on Monday afternoon, Mr Albanese said he was looking forward to "constructive dialogue", but stressed there were "no preconditions" on the talks.

James Laurenceson, Director of the UTS Australia-China Relations Institute, said the President Xi was seeking two assurances from Australia: that it would maintain its One China policy, not acknowledging Taiwanese independence, and it would not join the US in containing China economically.

"I think there's enough goodwill, in Beijing and in Canberra now, to put some meat on those bones," he said.

Mr Laurenceson said President Xi's presence would send a "decisive signal" to Chinese bureaucrats that "it's okay to engage with Australia again".

"I think quite quickly, we are going to see improved engagement, improved access in the Australia-China official space more broadly," he said.

"Is it possible that lobster shipments might suddenly start finding that way successfully through Chinese customs? ... Are those sorts of measures possible? Yes, I think they are."