"The fundamental solution to the Palestinian issue lies in the establishment of an independent Palestinian state based on the 1967 borders with East Jerusalem as its capital," Xi said, according to Chinese state media, reiterating a 1967 UN Security Council resolution that Israel has long rejected.
The international community should increase development assistance and humanitarian help to the Palestinians, Xi added.
Palestinians seek statehood in the West Bank, Gaza and East Jerusalem, territories occupied by Israel in the 1967 Middle East war. Israel quit Gaza in 2005 but continues to expand settlements in the West Bank and calls Jerusalem its eternal, indivisible capital.
Peace talks that were brokered by the United States have been frozen since 2014.
Palestinians' internal divisions also complicate peacemaking, with the Islamist Hamas movement that rules Gaza publicly sworn to Israel's destruction. Abbas heads the Palestinian Authority that exercises limited self-rule in the West Bank.
Abbas is in Beijing on a three-day visit in which he hopes to demonstrate Chinese support for a Palestinian state, after failing to meet with US officials while in New York for the United Nations General Assembly last year.
China has historically good relations with the Palestinians and since Abbas' last visit in 2017 has consistently talked up its capabilities in mediation, although with little to show in this regard until it brokered a surprise deal between Iran and Saudi Arabia to restore diplomatic ties in March.
"We have always firmly supported the just cause of the Palestinian people to restore their legitimate national rights," Xi told Abbas at a welcome ceremony at Beijing's Great Hall of the People.
Xi and Abbas also announced the two sides had agreed to establish a strategic partnership and signed a number of bilateral documents, including an economic and technological cooperation pact.
On Tuesday, Chinese Foreign Minister Qin Gang offered to contribute Chinese wisdom to the Palestinian issue in a separate meeting with Palestinian counterpart Riyad al-Maliki.
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