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China and Mongolia Wednesday upgraded their relations as they looked forward to co-operating more in the future.

The strengthened partnership was announced during a meeting between visiting Chinese President Hu Jintao and his Mongolian counterpart Nachagyn Bagabandy.

"China and Mongolia will respect, understand, support and trust each other and be good neighbours, friends and partners for generations,'' said Hu, when meeting the press after the talks which he described as "frank and in-depth.''

He added that the nation is ready to actively develop relations with its neighbours.

Under the new relationship, the two countries will develop political trust, respect each other's independence, sovereignty and territorial integrity and development paths, and resolve differences through consultation.

They will expand economic ties and cultural, scientific and personnel exchanges.

China and Mongolia will also maintain peace along their 4,676-kilometre border and work together on regional and international issues.

Bilateral relations have developed greatly since 1994 when the two countries renewed an earlier treaty pledging friendship and co-operation.

China is now the largest investor in and trade partner of Mongolia, accounting for nearly 40 per cent of the foreign capital flowing into the country and more than 40 per cent of its trade volume. Still, both leaders believe that there is room for better economic ties.

According to Bagabandy, future co-operation will focus on infrastructure construction and mining of Mongolia's natural resources.

"The leaders of the two countries have agreed that they will stage large-scale projects that, on the one hand, will push forward the development of Mongolia and will contribute to China's economy on the other hand,'' said Bagabandy.

In its latest effort to foster closer economic ties, China has decided to provide US$300 million in loans on favourable terms to Mongolia for the construction of major mining and infrastructure construction projects.

Hu arrived in the Mongolian capital Ulan Bator for a State visit yesterday afternoon. He is scheduled to meet Mongolian parliamentary speaker S. Tomor-Ochir and Prime Minister Nambar Enkhbayar today before leaving for Beijing.

"This trip has continued the momentum for frequent contacts and the tradition of exchanges of visits,'' said Bagabandy. "The visit has also raised new goals for the development of bilateral relations.''

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