Menon said, "The two countries have found a modus vivendi to deal with the boundary issue and to manage their different approaches to issues where their peripheries overlap."
He was speaking at a seminar on India-China relations organised by Indian Council for World Affairs.
"While there may be differences in method and choice of tools, in most cases there is a marked similarity of goals," he said.
"Differences in worldview, structure, systems and foreign policy making have not prevented and will not prevent an expanding engagement between India and China," he added.
Menon's statement comes just days before External Affairs Minister S M Krishna goes to Beijing when the two sides are likely to discuss dates for the 14th round of boundary negotiations between their special representatives.