China and India will sign a US$65 billion trade and infrastructure deal during a summit between Chinese President Xi Jinping and Indian Prime Minister Narendra Modi in New Delhi this week, a move that could improve bilateral ties rife with mutual mistrust and acrimony.

The deal comes after Japan pledged a US$35 billion investment in India spread in the next five years that includes a provision for bullet trains and joint security programs, during a summit in Tokyo early September between Modi and Japanese Prime Minister Shinzo Abe .

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The China-India deal will upgrade India's current British-made rail system through the construction of new railroads with automated trains and modern stations.

China, which has proven its capability in the construction and development of its railroad system, claims its high-speed trains are more cost-efficient than Japan's.

Additionally, Beijing is also considering another US$50 billion investment to build roads, ports and bridges in the region, Reuters has learned.

This is in-line with Modi's thrust to boost India's economic growth and decrease the trade deficit which has already reached US$31 billion last year.

Ahead of Xi's three-day visit to New Delhi, Chinese Assistant Foreign Affairs Minister Liu Jianchao said India is looking to enhance cooperation with China and other nations to develop its railroad system, adding that New Delhi has concrete ideas on how to achieve it.

Tensions between China and India have been strained since 1962 following the Sino-Indian border war that underscores the fragility of ties between the two countries. So far, both countries have been able to avoid a repeat of the 1962 scenario despite relatively minor border skirmishes, incursions and standoffs in the ensuing years.

But the continued confrontations have only served to cultivate mutual distrust of each other such as in China's refusal to support India's push for a permanent seat in the UN Security Council and India's stance in China's exclusion in the South Asian Association for Regional Cooperation.

Despite this, observers cited by the Chicago Tribune say this week's China-India summit - which will be the first for both leaders - could potentially alter the dynamic between the two countries, claiming that enhanced economic cooperation may help borders seem less relevant.

Tagsborder dispute, economic cooperation, Sino-India War, Foreign Policy, Foreign trade