GANGTOK, India - China plans to extend its railway linking Beijing to Tibet to a newly opened border point in India's northeast and possibly link it to India's east coast, the Chinese envoy to New Delhi said on Friday.

Ambassador Sun Yuxi's comments came a day after the Asian giants reopened an ancient, Himalayan trading route, once part of the Silk Road, adding impetus to booming bilateral trade 44 years after the link was snapped when they fought a border war.

"Once trade starts, people will demand better transportation facilities," Sun told Reuters in an interview in Gangtok, capital of the tiny Indian state of Sikkim, joined to Tibet through the Nathu La pass on the border.

Beijing had decided to first extend the railway to Lhasa, inaugurated last week, to the Tibetan city of Shigatse and then to Yadung, Sun said.

"From Yadung, the Indian border area is only a few dozens of kilometres away," he said.

On the Indian side, New Delhi planned to build a railway to Sikkim and once complete, the missing rail link between India and China would be less than 100 km (60 miles), the envoy said.

"Then, anytime we feel the need we will link it ... we are expecting to ... if the train got through all the way to Kolkata, that will be something. Lots of potential, opportunities will develop there," Sun said referring to India's eastern port city.

The railway to Lhasa, the world's highest, was opened by Chinese President Hu Jintao this month.

Beijing and some analysts say the railway and the opening of the Nathu La trade route ties in with China's goal of developing the long-isolated Tibetan region.

TRADE DESPITE BORDER ROW

Although connecting Kolkata to Lhasa by a railway may sound extremely ambitious, more so as the route would pass through tough Himalayan terrain, it could not be completely ruled out, a senior Indian Foreign Ministry official said.

"For the Chinese, nothing seems impossible. They feel if they can take it to Lhasa they can take it anywhere," he said.

Sun, a former Foreign Ministry spokesman and ambassador to Afghanistan, said over time local people and then tourists would be allowed to cross at Nathu La, making the post at 4,310 metres (14,200 feet) the first crossing for citizens of the two nations.

The opening of Nathu La also showed India and China could do business even though their decades-old border dispute was yet to be settled, the envoy said.

Last year, the neighbours agreed to resolve the row politically. But talks have made slow progress and much of their 3,500-km (2,200-mile) frontier remains disputed.

Both sides have been tightlipped on details of negotiations after several rounds of talks between special envoys.

Sun said both sides were positive but a timeframe could not be set to reach a settlement.

"We are expecting a high level visit before the end of the year, and before that, another round of talks," the ambassador said referring to President Hu's planned visit to New Delhi.

"So we are approaching that very positively."