Indian and Chinese border troops held their first formal meeting in Arunachal Pradesh at Kibithu village, a small hamlet perched at 11,000 feet (3,300 meters) on the border with China's Tibet region, an army statement said.
"Interaction between the Indian and Chinese armies is seen as a giant step forward towards contributing significantly in further cementing the bonds of mutual trust, confidence, and friendship," it said.
"Kibithu could turn into major international trading hub due to its natural resources and potential for trade."
The village sits on a trade route long used by tribal people in Arunachal Pradesh and Tibetans until a brief but bitter border conflict in 1962 damaged relations between the world's two most populous countries.
Senior Indian state and federal officials visited Kibithu last week to study the prospects for reopening the trade route.
Trade between the two countries has expanded rapidly in recent years, to 18.7 billion dollars in 2005. During Hu's visit both sides are expected to continue talks on an agreement that would establish a free-trade area.
Border issues are also likely to be on the agenda, with China reiterating its claim to Arunachal Pradesh last week.
China's ambassador to India told an Indian news channel that the 90,000-square-kilometer state of Arunachal Pradesh was Chinese territory, a declaration strongly disputed by India's Foreign Minister Pranab Mukherjee.
India, in turn, says China is occupying 38,000 square kilometres (14,670 square miles) of Indian territory in Kashmir.

Copyright AFP (Agence France-Presse), 2006