The Indian and Chinese premiers pledged on Monday to resolve a border dispute that has soured ties for decades, saying good relations between the two Asian giants were key to world peace.

Chinese Premier Li Keqiang, making his first foreign visit since taking office, said that Beijing was determined to build up trust with New Delhi as he and a team of ministers signed a series of joint agreements with India.

His host, Indian Prime Minister Manmohan Singh, also stressed he regarded a good bilateral relationship as crucial to the wider region's development.

Singh said there was now a mutual desire to resolve the dispute and that a joint working group would be established to reach a lasting agreement.

"We agreed that our special representatives will meet soon to continue discussions seeking an early agreement on a framework for a fair, reasonable and mutually acceptable boundary settlement," Singh said after talks with Li. "Peace and tranquillity on our border has to be preserved," the Indian leader added at a joint news conference in New Delhi.

Li said the border dispute was a historical hangover and that there was a desire on both sides to overcome it.

"We have established the principles for settling the question," Li said.

"The two sides should continue to advance the negotiations on the boundary question and jointly maintain peace and tranquillity in the border area," he added.

The number two in the Chinese leadership offered New Delhi a "handshake across the Himalayas" and said the world's most populous nations could become a new engine for the global economy if they could avoid such irritants.

"Both sides believe that we need to improve the various border-related mechanisms that we have put into place and make them more efficient. We need to appropriately manage and resolve our differences," Li said at a joint news conference with India's Prime Minister Manmohan Singh, where both men appeared relaxed.

In a joint statement that seemed to address Indian gripes about its $29 billion deficit with China, they agreed to address the imbalance, with specific reference to pharmaceuticals, IT services and agriculture. India's Essar Group conglomerate is set to sign a $1 billion loan deal with China's China Development Bank and China's largest oil and gas producer PetroChina during the trip, sources said. They said the loan would be backed by the supply of refined products to PetroChina.

Speaking earlier, Li had said that good relations between India and China would "be a true blessing for Asia and the world".

"World peace... cannot be a reality without strategic trust between India and China," he added.

Several major roads in the Indian capital were closed to prevent Tibetan protesters from disrupting Li's visit, and exile groups complained of heavy-handed policing in their neighbourhoods.

After wrapping up his visit to India, Li is due to travel to Pakistan before heading to Switzerland and Germany. During his visit, the Chinese Prime Minister will also hold wide ranging talks with President Zardari and Caretaker PM Mir Hazar Khan Khoso‚ which will be followed by a joint stakeout. The prime minister will also host a banquet for his Chinese counterpart.

The Chinese Prime Minister will also meet leader of political parties.

On the second day of his visit‚ PML-N chief Mian Nawaz Sharif will call on Li Keqiang.

President Zardari will host a luncheon for the distinguished guest.

The Chinese premier will hold a joint meeting with chairman Senate and speaker National Assembly.

He will visit Pak-China Friendship Centre and plant a sapling at Shakarparian.

Pakistan and China would sign several memoranda of understanding (MoUs) for cooperation in various fields during the forthcoming Li’s visit.

The Presidential Spokesman Farhatullah Babar said the Senate session will be addressed by the visiting Chinese Premier Li Keqiang and it will be prorogued after the address by the Chinese Premier.