China and India have agreed to reopen border trade at the historic Nathu-la pass after more than 40 years, a symbol of rapprochement between the two Asian giants.

The pass, at an altitude of around 4,300 metres (14,100 feet) will open on July 6, the Xinhua news agency reported on Monday, and handle trade between the tiny northest Indian state of Sikkim and southern Tibet.

"The reopening of border trade will help end economic isolation in this area and play a key role in boosting market economy there," Tibet vice-chairman Hao Peng said in comments carried by Xinhua.

The agreement to reopen the ancient Silk Road route was the latest sign of warming relations between the world's most populous countries.

China now recognises Sikkim, a former Buddhist kingdom, as part of Indian territory, and although much of their 3,500-km (2,200-mile) border remains disputed, last year they agreed to settle the issue politically.

Bilateral trade grew to $18.7 billion in 2005, up 37.5 percent from the previous year, Chinese figures show.

With the new pass, iron ore and livestock products from India and wool, herbs and electric appliances from China, could be transported over the narrow, mountainous border road, Hao said.

Sikkim's government has yet to win approval from New Delhi for a highway from Nathu-la to western India that could further boost trade.

It was not immediately clear if the increased commercial traffic would extend to the flow of people across the border.

The passes between Sikkim and Tibet were once part of the Silk Road, a network of trails which connected ancient China with India, Western Asia and Europe.