Although ties between the two giant Asian countries have been vexed by tensions over issues such as Tibet, close Chinese links with Pakistan and territorial disputes – both governments now say they are looking past their disagreements.

"Your excellency's visit this time to China has fully shown the importance you have attached and the Indian government has attached to the China-India relationship ...," Chinese President Hu Jintao told the Indian leader at the Great Hall of the People Tuesday.

Vajapayee described his meetings with Chinese leaders as “excellent”.

"They have confirmed that the desire to build stable, enduring and forward-looking ties of friendship is shared by the highest political levels in both countries," he said.

On Monday, Chinese Premier Wen Jiabao and Vajapayee signed a declaration outlining what both sides hope will be a new era of harmonious relations.

In a move that the Chinese foreign ministry called, “an important and positive expression,”  India stated that it recognises the Tibetan autonomous region as Chinese territory.

Prime Minister Vajpayee and
Chinese Premier Wen Jiabao
declared a new era of relations

But at a news briefing later on Tuesday, India's External Affairs Minister Yashwant Sinha said India's stated position on Tibet in the declaration does not amount to a change in policy.

"India's position on Tibet has been consistent. And that continues to be the position today also," he said.

Also under the declaration, India reassured China it will not allow Tibetans to conduct anti-China activities on its soil.

When asked whether the Tibetan spiritual leader, the Dalai Lama and the Tibetan government exiled in India would be allowed to remain there, Sinha said: "India regards his Holiness the Dalai Lama as a religious leader. I'd like to say there's no change in the position here."

"What we have said is consistent with what we have said in the past. I don't think the question of Dalai Lama leaving India or asking to leave India arises at this point in time," he said.

Closer to Sikkim resolution

Indian media reported that China has recognized India's sovereignty over the north-eastern Indian state of Sikkim in exchange for India's official recognition of Tibet as a part of China.

Sinha did not confirm this, but indicated the two countries had come closer to resolving the dispute over Sikkim. It has proven to be problematic issue in bilateral relations for decades.

India is home to about 100,000 Tibetans who fled China. It also provides the base for the Tibetan government-in-exile.

Analysts say that the move to recognise Tibet as part of China could remove a significant source of tension between New Delhi and Beijing.

But little progress appears to have been made on a four-decade-old boundary dispute.

India accuses China of occupying 38,000 square km of territory in Kashmir while Beijing lays claim to 90,000 square km of land in Arunachal Pradesh.

Both two sides vowed that common interests should outweigh their differences.

The economies of India and China have been growing at a fairly rapid rate, with bilateral trade growing at an annual rate of 30 percent.

Vajpayee said the two countries have “much further to go to realise the full potential of our partnership.”