Mr Modi will meet Chinese President Xi Jinping in Xian, capital of Mr Xi’s home province of Shaanxi, and will later travel to Beijing and Shanghai.
The leaders of the world’s two most populous nations are expected to sign deals worth billions of dollars.
Relations are still strained over a long-running border dispute.
China is India’s biggest trading partner with commerce between the two countries totalling $71bn (£45bn; €62bn) in 2014.
But Indian figures show that its trade deficit with China has spiralled from just $1bn in 2001-02 to more than $38bn in 2014.
Mr Modi said ahead of his visit that he hoped it would increase the prosperity of Asia.
“I am confident my visit will lay the foundation for further enhancing economic co-operation with China in a wide range of sectors,” he tweeted last week.
Mr Modi’s decision to start his trip in the ancient central city of Xian – some 1,000km (600 miles) from Beijing – is being seen as symbolic of the move to improve relations between India and China.
Mr Xi, who like most Chinese leaders seldom hosts foreign dignitaries outside the capital, issued the invitation while visiting Mr Modi’s home town in Gujarat state last year.
After arriving on Thursday, Mr Modi tweeted pictures of himself visiting the Wild Goose Pagoda and the Terracotta Warrior exhibition outside the city, saying he had received a “warm welcome” from dignitaries.
He is expected to have dinner with Mr Xi, before travelling to Beijing on Thursday evening.