Writing in the Daily Telegraph, the business secretary said the British must not be "economic nationalists" and look inwards.
"China is the new economic superpower and we must treat its re-emergence with respect: as an opportunity rather than a threat," he said.
"Britain has the potential to benefit from Chinese growth and the flow of goods and services that has resulted. Our future prosperity will depend on it."
Cable's comments were welcomed by Jonathan Portes, the director of the National Institute of Economic and Social Research who said the immigration rules were too tight.
"Vince Cable is quite right. Of course, the problem goes much wider than just the visa system for Chinese businessmen," he told The Huffington Post UK.
"If we're serious about the UK being 'open for business', we need a system that encourages, not discourages, skilled migrants and foreign students, as well as business visitors."
Cable said that while the Chinese were keen to invest in and visit Britain, the current "bureaucratic" visa system was holding them back.
"In the past five years, our share of Chinese visitors has been dropping," Cable warned. "With anecdotal evidence of people saying our visa system is unfriendly and inflexible."
He added: "We cannot allow red tape to deter the very people that we want to come to the UK and help make the economy stronger.
"We want to create and promote an image of Britain which means and delivers what it says on the tin: open for global business."
In November 2010, in the first year of the coalition, Cable joined a high-level delegation of British ministers including David Cameron to China to drum up trade.
The Lib Dem business secretary's comments are unlikely to be welcomed by the Theresa May's Home Office, which is under pressure to meet the Conservative Party pledge to cut net migration to under 100,000.
The government has already caused a minor spat with Romania and Bulgaria following reports the UK planned to place adverts in those countries to dissuade migration to the UK once they join the EU.