India and China on Monday signed two major agreements -- one on expanding border trade and the other a joint declaration laying down guiding principles for bilateral ties.

Complete coverage of Vajpayee's visit to China

Chinese Premier Wen Jiabao described the inking of the two agreements as a 'new phase' in Sino-Indian ties.

The details of the two documents will be disclosed on Tuesday.

But there was speculation that expansion of the border trade could be significant if it involved trade through Nathu La Pass in Sikkim, which China has refused to recognise as part of India.

The two documents were inked at the end of the first day's talks between Vajpayee and his Chinese counterpart during which the contentious border dispute was among the topics discussed with 'an openness and frankness as between friends'.

Wen described the signing of the two documents, at the Great Hall of the People, as 'a major feat'.

Diplomatic sources told PTI the border trade agreement provides for trade through Sikkim. They added that India has also decided to recognise the Tibetan autonomous region as part of the territory of the People's Republic of China.

If trading posts on the Sikkim-Tibet border are opened, it will, in effect, recognise Sikkim as part of India, 28 years after its merger.

Besides the MoU on border trade, India and China also signed the first-ever joint declaration, to be made public on Tuesday, which lays down 'goals and guiding principles' for future relationship between the two Asian giants.