BEIJING, July 9 (Xinhua) -- China, Australia and New Zealand will hold their first-ever joint maritime drill in September near Australia.

    The news came out of the talks between Chinese Defense Minister Cao Gangchuan and Australian counterpart Brendan Nelson on Monday.

    Nelson said Chinese vessels would visit Australia in September and hold a "search-and-rescue exercise" with Australia and New Zealand.

    That will be good to "build trust and increase friendship", he said.

    Cao lauded the drill, China's first multilateral maritime drill, as "a step to show the expansion of our substantive military cooperation".

    China has conducted bilateral search-and-rescue drills with countries including Britain, France, Pakistan, India, Australia, Thailand and the United States since 2003.

    Nelson is here on his first visit to China since he assumed the post in January 2006.

    His visit comes just days after Australia issued a defense policy paper that said "the pace and scope of (China's) military modernization ... could create misunderstandings and instability in the region".

    The Chinese Foreign Ministry last week brushed aside Australia's concerns over China's military development, saying the country was firmly on the path of peaceful development.

    Yet, neither Cao nor Nelson directly touched upon the defense policy paper in their 90-minute talks. Instead they both hailed the good momentum of China-Australia military ties.

    Cao, also vice-chairman of the Central Military Commission and State Councilor, said China-Australia military ties had progressed well, citing frequent high-level visits, established consultation mechanism and substantive exchanges in specialized fields.

    But Cao warned, "Neither side should do anything to raise the concern of the other country."

    Australia would like to know more about China's military, though Nelson acknowledged its transparency had improved.

    Cao explained China's military expenditure and defense policy in the talks.

    "We think it perfectly appropriate for a country like China to increase its military capabilities," as China's economy grew, Nelson said.

    Nelson said the Australian military would like to work more closely with China on fighting terrorism, peacekeeping and disaster relief.

    Nelson will deliver a speech at the National Defense University of the Chinese People's Liberation Army later Monday before meeting with top Chinese legislator Wu Bangguo.

    Nelson will conclude his four-day China visit on Tuesday.