updated 4/11/2005 7:15:48 AM ET 2005-04-11T11:15:48

India and China, the world’s two most populous countries, agreed Monday to create a “strategic partnership” in an effort to end their longstanding border dispute and boost trade and economic cooperation.

The agreement signaled a significant shift in relations between the two Asian giants after decades of mutual distrust and suspicion.

“India and China can together reshape the world order,” Indian Prime Minister Manmohan Singh said after a welcome ceremony for his Chinese counterpart, Premier Wen Jiabao, at India’s presidential palace.

Together the two nations account for one-third of the world’s population.

The statement announcing the partnership was signed by both premiers and said the agreement would promote diplomatic relations, economic ties and contribute to the two nations “jointly addressing global challenges and threats.”

India-China relations have “acquired a global and strategic character,” it said.

“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 a raft of agreements for cooperation in such diverse areas 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 told reporters earlier Monday.

War over border in 1962
The two countries outlined a set of broad parameters to demarcate their disputed boundary through a “fair, reasonable and mutually acceptable solution, through equal and friendly consultations,” the joint statement said.

India and China share a mountainous 2,500-mile border, parts of which are not demarcated. The two sides went to war over the disagreement in 1962.

Meanwhile, both sides have in recent years forged closer economic ties, hoping improved trade relations will also help expedite the resolution of political differences.

On Monday, the two leaders agreed to boost bilateral trade to $20 billion by 2008. Last year, trade totaled $13.6 billion, with India recording a trade surplus of $1.75 billion, according to India’s trade ministry.

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 feasibility and benefits that would accrue from establishing such a trade area.

On Sunday, Wen visited the southern city of Bangalore, India’s technology hub, and said the two nations should put aside their rivalry and instead pool their resources.

He said India and China can together lead the world in information technology, heralding a new “Asian century.”

Wen was expected to bring up the issue of Tibet and the role of the Tibetan spiritual leader, the Dalai Lama, 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 after he fled Tibet in 1959 following an aborted uprising against Chinese rule in the territory.

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