The one-day search-and-rescue exercise got under way on Friday in the East China Sea off Shanghai, signalling a new bonhomie between the world's two most populous countries who once fought a war in 1962.
Experts declared the joint exercise as a blossoming of ties between the two nuclear neighbours.
"This is part of expanding India-China relations, driven by their mutual desire to solve long standing problems," C Rajamohan, a South Asia expert with New Delhi's Jawaharlal Nehru University told Aljazeera.net.
"Ties between the two have never been so good," he said.
The joint naval exercise was agreed upon during a visit to China by Prime Minister Atal Behari Vajpayee earlier this year, the first by an Indian Prime Minister in a decade.
"The joint drill is result of India's multi-dimensional defence diplomacy," Rajamohan explained, referring to India's policy of pursuing relations with major military powers including the US and Russia.
Long presumed as an ally of India's bitter ally Pakistan, China is said to be warming to India.
Zhang Minquiu, a professor of international relations at Peking University said the exercise was a significant step in a long and deliberate process by China to balance its relations with both India and Pakistan.
"This is part of expanding India-China relations, driven by their mutual desire to solve long standing problems"
South Asia expert
"I think Pakistan should welcome this policy, India should welcome it. If China supports only one side, it makes relations between them more tense," she said.
The joint exercise was aimed at ensuring the safety of maritime trade and improving coordination in search-and-rescue at sea, the Indian Defence Ministry said earlier this month.
It comes after years of underlying mistrust and tensions between the two, accentuated by border disputes and China's supplies of military hardware to Pakistan.
But bridging the differences makes sound economic sense for both India and Pakistan. Both are attractive markets for the other and experts say economic prospects are simply alluring.