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Beijing: Prime Minister Manmohan Singh and his Chinese counterpart Li Keqiang on Wednesday signed an agreement to resolve long-running border disputes between India and China, and declared their nations are poised to enter a new era of economic engagement.

“When India and China shake hands, the world takes notice," Singh said at a joint briefing with Li on Wednesday during his three-day trip to Beijing. “My visit to China has put our relations on a path of stable and fast growth."

Under the agreement, India and China will avoid making threats to use force against each other and refrain from seeking unilateral superiority along their 3,500km border. Both sides agreed to exchange information on military exercises and show maximum restraint in the event border forces come to a “face-to-face situation".

The pact signals a warming in ties as it follows a three-week military standoff in Ladakh in April—one of the most serious incidents between the two neighbours since the 1962 war.

“China and India are two old civilizations," China’s Li told reporters following talks with Singh. “Our two peoples have the wisdom and our two governments have the ability to manage our differences along the border so that it won’t affect the overall interests of our bilateral relations."

“I am sure it (the border pact) will help to maintain peace, tranquillity and stability in our border areas," Li added.

Singh said: “I recalled to Premier Li how much India appreciated his decision to make India his first overseas destination after taking over as Premier."

Chinese foreign ministry spokeswoman Hua Chunying said the border agreement “is evidence that relations between China and India are becoming mature and rational", adding: “It will build on previous good experiences and practices."

The latest border agreement subsumes the previous four deals, the last of which was signed in January 2012.

Li also agreed to take steps to narrow an “unsustainable" trade balance between the two countries, Singh said.

“We are taking forward the suggestion made by Premier Li in New Delhi for a Chinese industrial park to act as a magnet for Chinese investment in India," he added.

Bilateral trade touched $66.5 billion last year, of which China’s exports to India totalled to about $47.7 billion. The burgeoning trade deficit has touched nearly $20 billion amid declining Indian exports of raw materials such as iron ore.

India has been pressing China to open up its markets in areas such as information technology and pharmaceuticals, where Indian companies have an edge. India and China have set a target of $100 billion in bilateral trade by 2015.

“India faces an unsustainable imbalance in its trade with China. One of the ways of overcoming the trade deficit is for India to attract larger flows of foreign direct investment from China," Singh had told the official Chinese media on Tuesday.

A joint statement issued after Singh’s talks with the Chinese leadership said the leaders recognized that India and China are poised to enter a new stage of economic engagement.

“We are also exploring the feasibility of the Bangladesh-China-India-Myanmar Economic Corridor connecting the two countries via the southern Silk Road," Singh said.

The two sides also signed an agreement to strengthen cooperation on transborder rivers that is aimed at allaying Indian concerns about the possibility of China building new dams on the Brahmaputra. The Chinese side agreed to provide more flood data on the Brahmaputra.

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