The Tibetan spiritual leader said, "China has to realise its goal of becoming a superpower, it should also lay emphasis on moral authority and end censorship."
He was speaking to reporters after his meetings with President Barack Obama and Secretary of State Hillary Clinton.
"China should be an open society. Then, trust can develop, particularly with India," he said.
"I think the two most populated nations, genuine friendships between these two countries are very, very essential. Genuine friendship only comes on the basis of mutual trust," he said.
He said besides economic development, it was crucial that the Chinese also join the world mainstream.
The Dalai Lama argued that it is also the responsibility of the rest of the world to bring China into mainstream of world democracy,
"You see, in China, the hardliners are thinking, in their eyes, the very word 'democracy" is something negative," he added.