The friendly atmosphere was tempered, however, by Prime Minister Manmohan Singh's call for China to make concessions to reduce a growing two-way trade imbalance.

Singh and his host Premier Wen Jiabao signed a broad agreement that they said would push an often testy relationship to a new level of cooperation.

The pact lifts the target for bilateral trade -- which soared to 38.7 billion dollars last year -- to 60 billion dollars by 2010, and pledges a renewed effort to solve a Himalayan border dispute over which they fought a brief war in 1962.

"We should not ask who will out-do whom," Wen told reporters.

"The fast development and growing national strength of China and India presents opportunities for us to deepen our bilateral relations."

The agreement also commits the two sides to another joint military exercise this year -- following their first-ever exercises in December -- and to pursuing a possible regional trade agreement.

Singh, who arrived Sunday for a three-day visit, called the document "an important milestone in the evolution of our relations."

"The profound changes taking place in the world today present both our countries with a historic opportunity to work together towards a 21st century that is conducive to peace and development," he told reporters.

"It reflects not only our common perceptions but also our desire to purposefully cooperate in the future."

However, Singh also said in a speech earlier in the day that Beijing must lift market barriers to Indian goods "to bridge the rising trade deficit between us."

New Delhi is looking to rein in a trade gap with China, which it says jumped to about nine billion dollars in 2007 from four billion dollars the previous year as two-way commerce has exploded recently.

Singh's visit, made in the company of Commerce Minister Kamal Nath, is the first by an Indian prime minister to China in five years.

It comes as the world's two most populous nations seek to strengthen ties and overcome decades of mistrust, much of it stemming from the border dispute.

"We stand ready to act on the strategic and overall interests of our bilateral relations and find a fair and reasonable and workable framework" for settling the issue, Wen said.

India says China occupies 38,000 square kilometres (14,670 square miles) of its Himalayan territory, while Beijing claims the whole of the northeastern Indian state of Arunachal Pradesh, which is 90,000 square kilometres.

The two sides have claimed a series of meetings on the dispute in recent years has made progress, but state-run Chinese media played down expectations of a breakthrough in the row, which caused the 1962 war.

An editorial in the China Daily called such hopes "unrealistic."

Before the Singh-Wen talks, the Indian delegation focused on China's growing trade surplus on Monday, with Nath saying the issue needed to be addressed quickly as trade soars.

Bilateral trade reached 38.7 billion dollars last year, according to Chinese customs figures, up 34 percent from the previous year.

"Sustainable trade has to be a win-win situation," Nath told journalists.

He added that various non-tariff barriers and copyright violations were hurting Indian exports in sectors such as agriculture, aviation and pharmaceuticals.

"I took up many other areas of discomfort to our businesses in accessing Chinese markets, in both trade and investment," he said in a separate news release.

Singh was due to meet President Hu Jintao on Tuesday.

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