The United States and China have agreed to establish a working group to explore a more regular dialogue between the two countries on strategic defence issues.
Defence Minister Liang Guanglie has held talks in Beijing with US Defence Secretary Robert Gates.
General Guanglie insisted China posed no threat and was decades behind nations with more advanced technology.
Mr Gates is on a four-day trip to China to cool tensions before President Hu Jintao visits the United States next week.
The BBC reports military ties between the two countries were briefly suspended early last year over a US sale of arms to Taiwan.
General Guanglie and Mr Gates both said after their meeting that they agreed strong military co-operation should continue and should not be affected by politics.
General Guanglie said Beijing remained concerned about US dealings in Taiwan, before seeking to reassure the US about China's military ambitions.
"The efforts that we place on the research and development of weapons systems are by no means targeted at any third country," he said.
He said China's military development was "entirely appropriate and
consistent with China's rise as an economic and political power".
Mr Gates said both US President Barack Obama and Chinese President Hu Jintao "clearly believe that a more robust military-to-military relationship is important".
He said he was convinced that the Chinese military leaders were "as committed to fulfilling the mandate of our two presidents" as he was.
Mr Gates will travel to South Korea and Japan later in the week, with the issue of North Korea high on the agenda.
China's official military budget quadrupled between 1999 - 2009 as the country's economy grew.
Last year, it was increased by 7.5% (a smaller amount than usual) to $US76.3 billion.