BEIJING (REUTERS, BLOOMBERG, AFP) - Japan and China signed US$2.6 billion (S$3.6 billion) in business deals and touted their warmer ties on Friday (Oct 26) during a groundbreaking visit to Beijing by Japanese Prime Minister Shinzo Abe as both face trade challenges from US President Donald Trump.

Premier Li Keqiang greeted Abe as Japan's flag flew outside the opulent Great Hall of the People across from Tiananmen Square, and they reviewed an honour guard before going inside for talks.

Relations between Asia's two biggest economies have improved in recent years after they sunk to new lows in 2012 when Tokyo "nationalised" disputed islands claimed by Beijing.

Addressing a joint press conference, Abe said that the two leaders had agreed to "play a constructive role for the sake of this region's peace and prosperity".

"I believe active trade will deepen ties between Japanese and Chinese peoples further," he said.

"Now, international conditions are unstable, and uncertainties have increased," Li said, adding that the countries' economic cooperation would "benefit the development of global free trade".

The relationship has rapidly warmed up as Trump has slapped massive tariffs on China while also targeting Japanese exports in his effort to cut US trade deficits, despite touting his personal bonds with Abe and Chinese President Xi Jinping.

Abe travelled with nearly 1,000 delegates from Japanese companies, who struck 500 deals worth a total of US$2.6 billion, Li said, without providing details.

The Nikkei newspaper said one of the deals is a joint smart city project in Thailand.

China and Japan also agreed to boost cooperation in the securities markets including the listing of exchange-trade funds (ETFs), and facilitate smoother customs clearance. Both sides signed a currency swap agreement of up to 3.4 trillion yen (US$30.29 billion), effective until 2021.

They also inked a deal towards establishing a yuan clearing bank. Li said both sides had agreed that as major countries, China and Japan should uphold free trade and accelerate talks on the Regional Comprehensive Economic Partnership (RCEP) and on a China-Japan-Korea trade zone.

RCEP is a free trade agreement proposed by China with Southeast Asia and various countries on the Pacific Rim including Japan.

The Japanese companies are eager for increased access to China's massive market, while Beijing is interested in Japanese technology and corporate know-how. "Though the US is quite an influential factor in China-Japan ties, the effect is limited," China's nationalistic Global Times said in an editorial.

"If Beijing and Tokyo intend to plan their future bilateral relationship based on Washington's attitude, they will only get lost," the state-run daily said.

Flags of both countries lined Changan Avenue, a thoroughfare that cuts through the heart of Beijing near Tiananmen Square.

Chinese Premier Li Keqiang, who travelled to Japan in May, greeted Mr Abe at Beijing's Great Hall of the People following his arrival on Thursday afternoon.

"Sino-Japanese relations are back to their normal trajectory, and showing consistent improvements," Mr Li said. "I hope for even more progress."

The Chinese premier said in a speech at Beijing's Great Hall of the People on Thursday that China and Japan should safeguard free trade and anchor global growth.

"We would like to push ahead with cooperation in third countries as part of our Belt and Road initiative, and drive bilateral cooperation to the next higher stage," Mr Li said.

But the Belt and Road project has come under fire for saddling poor nations with debt through big projects that are not economically viable. China rejects the criticism.

Japanese defence officials are wary of its military implications, and Tokyo is pushing its Free and Open Pacific Strategy to promote trade and infrastructure in Asia, Africa and the Middle East.

Japan wants to ensure any joint projects with China are transparent, open and fiscally sound, officials said.

Japan also hopes for progress towards implementing a 2008 agreement on jointly developing gas fields in disputed waters, and wants China to ease import limits on produce from areas affected by the 2011 Fukushima nuclear disaster.

Mr Abe's three-day visit is also expected to promote trust, which has been fragile at times since they restored diplomatic relations in 1972. He attended a ceremony celebrating the 40th anniversary of the bilateral Peace and Friendship Treaty on Thursday.

"We hope both sides would work hard to promote regional peace, safeguard multilateralism and free trade, and become the axis of stability, growth and momentum for not just Asia but the world," Mr Li said in the speech on Thursday.

Mr Abe said their two countries were playing "an indispensable role in the economic development of not just Asia but the world".

In the past year, China has stepped up its outreach to Japan and others as it locked horns over trade with the United States.

Japan has trade problems of its own with the US.

While worried about China's growing naval power, Japan is also keen for closer economic ties with its biggest trading partner, but it must manage that rapprochement without upsetting its key security ally, the US.

Mr Abe, who returned to power in 2012 when Sino-Japanese ties were in tatters due to a feud over East China Sea islands, has met President Xi many times since their first chilly conversation in 2014 on the sidelines of a regional summit in Beijing.

Mr Abe told reporters in Tokyo before flying to Beijing: "Through this visit, I want to elevate ties to a new level."

He added that he expected frank talks with Mr Xi and Mr Li covering North Korea and trade issues, as well as bilateral ties.

But both sides will be hoping more visits will follow.The Nikkei reported that Mr Abe is keen to invite Mr Xi to Japan for an official visit next year, before or after the Group of 20 summit in Osaka.

The Japanese side is preparing to make it a full state reception, including an audience with the emperor.

"If Xi promises to come to Japan next year, that would be very big," said Mr Kiyoyuki Seguchi, research director at the Canon Institute for Global Studies in Tokyo.

"If that is realised, the improvement in Japan-China relations will accelerate."

Despite the thaw in ties, mistrust persists.

War-time history still rankles, with China often complaining that Japan has not fully atoned for its occupation of parts of China before and during World War II.

"Just looking how the flags of both countries are hung next to each other on Changan Avenue makes me uncomfortable," said a user on China's Weibo microblog platform.

"Japan's wartime aggression is still deeply hurting."

Some other users urged caution during Mr Abe's visit, accusing an "ambitious" Japan of being a two-faced neighbour.