The world's biggest steel maker, China Baowu Group, has raised the prospect of a massive investment in Western Australia to build a new green steel mill.
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The company's chairman, Chen Dorong, told Trade Minister Don Farrell in Beijing that the company wanted to decarbonise its operations and was eyeing Australia's abundant clean energy to support the transformation.
But, injecting an element of competition into the proposal, he said other locations such as West Africa and South America were also "very well positioned for such an idea", and the company was also talking to Saudi Arabia.
Mr Chen said the company hoped to choose Australia for the investment, which was "indeed an urgent test".
Senator Farrell's meeting late on Thursday with the biggest buyer of Australian iron ore will be followed by tougher discussions on Friday night AEST with his Chinese counterpart, Commerce Minister Wang Wentao.
The ministers will use the talks to negotiate, "line-by-line", a pathway towards the lifting of Chinese trade bans on about $20 billion worth of Australian exports.
There are no expectations for an immediate fix to the long-running trade dispute, with Senator Farrell warning "the issues didn't occur overnight, and they're not going to be resolved overnight".
On the second day of his Beijing trip, Senator Farrell will also visit a local supermarket where Australian products such as meat, wine and lobster were once sold, but are now unavailable.
In further talks, the Minister will meet with the head of China Oil and Foodstuff Corporation - the nation's largest foodstuff and agricultural supplier.
The state-owned enterprise is a major buyer of Australian-grown sorghum, wheat, barley and chickpeas, and bought around 30 per cent of its wine from Australia before China's prohibitive tariffs.
China Baowu Group recently had a $2 billion joint venture with Rio Tinto approved by Australian regulators to develop the Western Range iron ore project in the Pilbara.
Mr Chen said the company wanted to do more business with Australia, proposing to undertake the clean steel joint venture with Rio Tinto and BHP, using "new energy resources like photovoltaic and natural gas".
In talks on Thursday, Senator Farrell told Mr Chen his visit to China was well-timed - Labor luminary Jim Cairns, Australia's first trade minister to travel to China, visited 50 years ago this month.
"That was the year your company first purchased Australian iron ore," he said.
"So we think this is a very auspicious visit, and we very much appreciate the support that your company has given Australia, Australian companies and Australian workers over that 50 year period."
Mr Chen said there had been "twists and turns" in the Australia-China relationship in recent times - an understatement given the toxic trade relations of the past three years.
"But the fundamental direction is quite positive and both countries are moving quite fast," he said.
Last year, Baowu produced 132 million tonnes of steel, accounting for about 13 per cent of China's total.
India, by comparison, produced 120 million tonnes of steel last year.
"So Baowu always makes a joke that in the world, China is the largest steel producing country and Baowu is the second," Mr Chen said.
Later, at the Australian Embassy in Beijing, Senator Farrell met with Australia-China Chamber of Commerce heads, commiserating over the "very difficult circumstances" they had endured in recent years.
"There are very positive signs in terms of our trading relationship. There are (Australian) products back into the Chinese market, but there's more to be done," the Minister said.
AustCham chair Vaughn Barber said Australian businesses were now "pushing on an open door" in China.
He said the next step - the hoped-for removal of the trade blockages - would send a "very positive signal" to Australian businesses, not just those directly affected.
AustCham Shanghai chair Heidi Dugan said the enthusiasm of Australian companies that had remained in China during the freeze in bilateral relations was "absolutely incredible" to see.
She said some Australian businesses were "absolutely sprinting", including cosmetics firms, food and beverage companies, and creative businesses such as interior designers.
Green sector companies were also doing well, along with medical technology firms.
