Xi Jinping, the President of China, has received a 21-gun salute at Government House in Wellington.
Mr Xi was greeted on the lawn at Government House by Governor General Jerry Mateparae after a powhiri and before a haka by pupils of Rongotai College. He then observed a guard of honour and greeted local primary school children.
The ceremony was delayed by around an hour after Mr Xi's plane was delayed.
His motorcade included two buses of officials and one of media.
He then greeted VIPs on the courtyard in front of Government House, including new Labour leader Andrew Little and diplomats.
Outside the grounds Mr Xi was met by a crowd of hundreds, most waving Chinese flags, but a few holding signs of the Falun Gong movement, a spiritual practice banned in China.
Mr Xi's wife, Madam Peng Liyuan, received a bouquet of flowers from a pupil from South Wellington Intermediate before heading inside Government House.
Sir Jerry will host a state lunch for Mr Xi which will include members of the Government but only one Opposition MP, Mr Little. Others were not invited.
At the start of their formal meeting, Mr Xi told the Governor General the relationship between the two countries was in "very good shape" but could be broader. Sir Jerry told Mr Xi "the relationship is a very special one" but work was required to develop it.
At the official bilateral meeting between Mr Key and Mr Xi at Premier House in the Wellington suburb of Thorndon, the Prime Minister welcomed the Chinese president, celebrating the "great role that Chinese nationals who have become New Zealanders play in our country".
In comments which were open to the media, Key said a review of the relationship would lead to greater links.
"We look forward to seeing how we can take our relationship to an even greater height."
It would be easy to see the relationship between New Zealand and China as "purely trading" Key said.
"There is so much more to it. It is so much broader and much deeper than that," Key said.
"The fact that New Zealand and China have agreed to a comprehensive partnership is a great sign of the maturity of our relationship between our two countries over the last 42 years," Mr Key said adding that the partnership would "sit well" with the burgeoning trade relationship.
Mr Xi's opening comments in the meeting were open to the media but a translation was not provided, as was the case at the state lunch earlier today.
The New Zealand sharemarket reached its highest level in a month.