NEW DELHI – India and China, the world's two most populous countries, agreed Monday to form a strategic partnership to end a border dispute and boost trade in a deal marking a major shift in relations between the Asian giants.
The agreement, signed by both premiers, eases decades of mutual distrust between the nations, which share a mountainous, 2,500-mile border and fought a war in 1962. Parts of the border still are not demarcated.
"India and China can together reshape the world order," Indian Prime Minister Manmohan Singh (search) said at a ceremony for his Chinese counterpart, Premier Wen Jiabao (search), at India's presidential palace.
Together, the two nations account for one-third of the world's population.
The agreement outlined steps to demarcate the disputed boundary through a "fair, reasonable and mutually acceptable solution, through equal and friendly consultations," a statement announcing the partnership said.
The agreement does not involve defense arrangements, so it will not give Chinese ships the use of Indian ports.
An 11-point plan to settle the border dispute was finalized Sunday at a meeting between India's National Security Adviser M.K. Narayanan (search) and China's Vice Foreign Minister Dai Bingguo (search), the leader of the Chinese delegation to the talks.
The plan states that the countries would consider historical factors, geographical features, people living in the area, security and whether the area was currently under Indian or Chinese control when marking the border.
India says China still holds 16,000 square miles of its territory in the Kashmir (search) region, while Beijing lays claim to a wide swath of territory in India's northeastern state of Arunachal Pradesh (search), which shares a 650-mile border with China's Tibet region.
China also recognized the Himalayan territory of Sikkim (search), located between Nepal and the kingdom of Bhutan, as a part of India, an Indian foreign ministry official said.
"A new map which the Chinese have published shows Sikkim as part of India. This is no longer an issue between us," Shyam Saran, a top official in the External Affairs Ministry, told reporters.
Sikkim was an independent principality before it was annexed by India in 1975. China never recognized Sikkim as an Indian possession and has claimed part of the territory as its own.
Pakistani Information Minister Sheikh Rashid Ahmed said the government had no immediate comment on the agreement between its two neighbors. The Foreign Ministry also declined to comment.
Saran said "the partnership is not a military alliance nor is it directed against a third country."
China is Pakistan's main trading partner and a big backer of its military, while it has tense but improving relations with India, with whom Pakistan has fought three wars.
Chinese engineers are helping fund and engineer a $248 million port in the remote southwestern Pakistani town of Gawadar. The project will decrease Pakistan's reliance on its main port in Karachi.
China also is helping fund a new nuclear reactor in Pakistan to be used to generate electricity.
India and China agreed to boost bilateral trade to $20 billion by 2008. Last year, trade totaled $13.6 billion, with India recording a $1.75 billion trade surplus, according to India's trade ministry.
The statement, while giving few details, said the agreement would promote diplomatic relations, economic ties and contribute to the nations "jointly addressing global challenges and threats."
"The leaders of the two countries have therefore agreed to establish an India-China strategic and cooperative partnership for peace and prosperity," the statement said.
The two countries also signed cooperation agreement in areas such as civil aviation, finance, education, science and technology, tourism and cultural exchanges.
"This is an important visit. We are working to promote friendly ties of cooperation between our two countries," Wen said.
Wen was expected to bring up the issue of Tibet and the role of the Tibetan spiritual leader, the Dalai Lama (search), who lives in exile in India, but it was not immediately clear if it was discussed.
India allowed the Dalai Lama to set up a government in exile in the northern Himalayan town of Dharmsala (search) after he fled Tibet in 1959 following an aborted uprising against Chinese rule in the territory.
Both sides have in recent years forged closer economic ties, hoping improved trade relations will also help expedite the resolution of political differences.
China is keen to develop a free trade area between the two countries. Their combined population is 2 billion, which would make it the largest free trade area in the world. During their talks, Wen and Singh agreed to set up a panel of experts to study the concept.