The Indian and Chinese prime ministers have signed nine agreements to boost relations between the two Asian rivals.
The visit is not expected to resolve the border dispute
The move came on the first full day of a state visit to China by India's Atal Behari Vajpayee.
This is the first visit to China by an Indian prime minister for 10 years.
It is being seen as an attempt by the two sides to introduce some warmth into what has been a frosty relationship since a border war in 1962.
Fifteen rounds of talks since the 1980s have failed to resolve their boundary disputes.
The nine agreements were signed after Mr Vajpayee held talks with his host, Chinese Prime Minister Wen Jiabao.
The agreements include:
"I hope my trip to China will strengthen trust and understanding between the two countries' people and governments and further promote our broad co-operation," Mr Vajpayee told reporters in Beijing.
- Increasing co-operation in science, technology, commerce and education
- Easing visa rules
- Setting up joint infrastructure development projects, focussing on water and energy resources
- Establishing cultural centres in each others' countries
For his part Mr Wen said: "I believe that your current visit will certainly yield a major impact on the further development of our relationship in the future."
China and India, which account for a third of the world's population, have had unsteady relations since their 1962 border war.
Mr Vajpayee has said he attaches "high priority" to relations between the two countries.
"India and China are two ancient civilisations which are trying to grapple with the challenges of the present to attain progress," he said as he left Delhi.
The meeting between the two prime ministers was preceded by an elaborate reception and a guard of honour for the visiting Indian leader.
Vajpayee hopes his visit will 'strengthen trust'
Indian Foreign Minister Yashwant Sinha told journalists that the emphasis in the talks between the prime ministers was more on exploring areas of mutual benefit, rather than trying to resolve their long-standing differences.
Mr Sinha also said Mr Vajpayee had raised India's differences with Pakistan over Kashmir.
Mr Vajpayee spoke of "the need for Pakistan to bring cross-border terrorism to an end as quickly as possible," Mr Sinha said.
Pakistan denies there is any movement of Pakistani-based militants into Indian-administered Kashmir.
India and China still dispute large areas of their common border.
India maintains that its main reason for having nuclear weapons is to defend itself from an attack from China.
There is also long-running tension over India's decision to allow the exiled Tibetan spiritual leader, the Dalai Lama, to base himself in northern India.
And correspondents say China has watched with unease as India's relations with the US have improved in recent months.
In economic terms, ties between the two countries have dramatically improved in recent years.
Bilateral trade has risen more than tenfold between 1991 and 2002.
Although India's imports of Chinese goods by far outstrip its exports to China, Indian business leaders believe Beijing's fast-growing economy will offer an increasingly attractive export market.
The BBC Asia analyst Jill McGivering says Beijing has a strategic interest in fostering relations with India. It would like to act as a counterweight to the growing military co-operation between Delhi and Washington.