The agreement was embodied in a landmark joint statement signed by visiting Chinese President Hu Jintao and Prime Minister Yasuo Fukuda following two hours of talks.

'The two sides confirmed that they are partners of cooperation and will not be threats to each other,' it said.

The key document was the fourth since the normalisation of ties in 1972 that will define the future development of bilateral relations.

To enhance mutual trust, they will alternately host annual summits in each other's country and boost people-to-people exchanges at all levels.

At a press conference after their meeting, Mr Hu said: 'PM Fukuda and I believe that Sino-Japanese relations are at a new historic starting point.'

Mr Hu arrived here on Tuesday for the much-heralded five-day visit to improve relations, the first such visit by a top Chinese leader in a decade.

It is also his longest trip to a single country since taking office.

Both sides were keen to keep the visit focused on the flowering friendship between the two countries.

Yesterday's talks were preceded on Tuesday by an informal dinner to underline the friendship between the top leaders.

Bilateral ties had been chilled by the 1998 visit of then President Jiang Zemin, who demanded an apology from Japan for its invasion of China.

Then came Prime Minister Junichiro Koizumi, whose visits to the Yasukuni war shrine angered Beijing.

Compared with 10 years ago, the economies of both countries are now so inextricably linked that they cannot afford to quarrel, say analysts.

Mr Hu's visit comes at a time when his host is seeing his popularity sink to new lows, fuelling speculation that Mr Fukuda may be out of office before too long.

But relations between the two countries have weathered several decades of changes in the Japanese political leadership.

Mr Hu was careful to leave historical issues out of his agenda. The joint statement yesterday merely said both sides 'will face history squarely and look towards the future'.

Significantly, the statement describes Japan-China ties as 'one of the most important bilateral relationships' for both countries, and that they 'shoulder grave responsibility for world peace'.

Observers said one of Mr Hu's objectives in coming here and making a display of improved ties with Japan was to thwart international efforts to contain China.

Mr Fukuda's predecessor Shinzo Abe had set Sino-Japanese ties rolling again with a visit to Beijing in October 2006.

Subsequently, he tried to align his country with the United States, Australia and India in an apparent attempt to counter China's growing military and economic might.

But Mr Abe's efforts failed as India, whose relations with China were growing, preferred to go its own way.

Besides bringing lots of goodwill, Mr Hu also announced that his government would lend a pair of pandas to Tokyo's Ueno Zoo to replace the last panda, which died about a week before the Chinese leader's arrival.

However, the loan comes with an annual 'rental fee' of about 100 million yen (S$1.29 million), which some media reports described as 'expensive'.

Under the Washington Convention on international trade in endangered animals, the free loan of such animals is banned.

As expected, there was little progress on bilateral issues, including how China-made dumplings came to be tainted with farm chemicals, causing widespread food poisoning in Japan earlier this year.

But both leaders claimed a solution was 'in sight' on the joint exploration of gas deposits in the Japan Sea, without saying how much longer it would take both sides to reach an accord.

wengkin@sph.com.sg

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