NEW DELHI — India and China, the world's two most-populous countries, agreed yesterday to form a strategic partnership to end a border dispute and boost trade in a deal marking a major shift in their relations.

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.

"India and China can together reshape the world order," Indian Prime Minister Manmohan Singh said at a 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 agreement outlined steps to establish 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, a prospect that worries strategic analysts in the U.S. and Japan.

A week after U.S. Secretary of State Condoleezza Rice came to India, talking of India's growing strategic and economic importance on the global stage, India and China also agreed to boost bilateral trade to $20 billion by 2008. Last year trade totaled $13.6 billion.

A joint 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 agreements in areas such as civil aviation, finance, education, science and technology, tourism and cultural exchanges.

Both sides have in recent years forged closer economic ties, hoping improved trade relations would 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. Wen and Singh agreed to set up a panel of experts to study the concept.

Ties with Pakistan

Wen has been to Pakistan, Bangladesh and Sri Lanka in recent days, hoping to reassure China's neighbors that increasing economic and military clout does not make it a regional danger.

China is Pakistan's main trading partner and a big backer of its military. It has tense but improving relations with India, with whom nuclear-armed 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.

Pakistani Information Minister Sheikh Rashid Ahmed said the government had no immediate comment on the agreement between its two neighbors.

Just days before his visit to China, Wen signed a deal with Pakistan to manufacture a jointly designed fighter aircraft called the JF-17. This announcement came just days after India announced its intention to buy F-16 and F-18 fighters from the United States.

Also possibly worrisome to the Chinese may be the Indian-U.S. plan for India to send its navy to patrol the Strait of Malacca between Indonesia and Malaysia, a crucial shipping lane. China has long considered Southeast Asia to be its own back yard.

But a retired Indian diplomat, who requested anonymity, told The Christian Science Monitor that China is less concerned about U.S. ties with India and more interested in building its status as a global economic and military superpower.

"China has the point of view that they are a rising naval power," the diplomat said. "The British took over the world because of naval power. The Americans replaced the British and took over the world because of their technology and naval power, and now the Chinese feel they are bound to be the next superpower of the world."

China may think it has reason to be wary of India if the U.S. is courting India to be a counterweight to a rising China. But many Indian officials and scholars say the future of Indo-Chinese relations may be less competitive and aimed more at allowing each to grow large enough to make the world multilateral once more.

"The bottom line is that we are the neighbors here. We share a border. I would like to see America take a wiser approach to these relations, and see the cooperation of India and China — which includes elements of competition — as a positive thing," said Mira Sinha Bhattacharjea, former director of the Institute of Chinese Studies in New Delhi.

Border-dispute plan

The 11-point plan to settle the border dispute was completed Sunday at a meeting between India's National Security Adviser M.K. Narayanan and China's Vice Foreign Minister Dai Bingguo, the leader of the Chinese delegation to the talks.

The plan states that when marking the border, 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.

India says China still holds 16,000 square miles of its territory in the Kashmir region, while Beijing lays claim to a wide swath of territory in India's northeastern state of Arunachal Pradesh, which shares a 650-mile border with China's Tibet region.

China also recognized the Himalayan territory of Sikkim, 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 India annexed it in 1975. China never recognized Sikkim as an Indian possession and has claimed part of the territory as its own.

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. He has called on both countries to "refuse to let questions left over from history disrupt and impede the development of bilateral relations."

Other projects

China's economic prosperity has been concentrated on the southern coast, while its populated central and western provinces have lagged behind. China has been hammering out numerous deals with its neighbors in South Asia. Most visible are two major highway projects: the Kodari highway through civil-war-torn Nepal, which should be ready by 2008; and a similar highway through Myanmar, also known as Burma, to the Bay of Bengal.

India, too, has gone on a building spree, developing an East-West trade corridor called the Tamu-Kalleva highway, from its northeastern province of Manipur through Myanmar and into Thailand.

"This investment in cross-border infrastructure has made the whole region sit up and take notice," said Nimmi Kurian, an associate research professor at the Center for Policy Research in New Delhi. "The Chinese economic presence, because of its investment, is becoming a magnet. It's pulling the region into its orbit."

The diplomatic offensive is rooted in two things China desperately wants abroad: resources and tranquility.

China is already the world's No. 2 oil importer, and its appetite for all sorts of industrial raw materials is growing, sparking such agreements as oil and gas deals with Venezuela, Kazakstan, Qatar, Australia and Russia.

Yesterday, Indian officials suggested the two nations cooperate for the world's shrinking energy resources.

Despite its galloping economy, most Chinese have missed out on the economic boom, and China wants a stable region, allowing it to focus its energy inward.