This is the first ever naval exercise between India and China

The search-and-rescue exercise is taking place off Shanghai.

Three Indian warships as well as aircraft and helicopters are involved in the five-hour operation.

Ties between China and India - which fought a brief border war in 1962 - have been improving lately, and both sides are seeking to expand trade.

"It's just the beginning," said KA Bopanna, a senior Indian naval commander.

The exercise is aimed at ensuring the safety of maritime trade and improving search and rescue co-ordination at sea, an Indian defence ministry official told the BBC.

This is only the second time ever that China's People Liberation Army Navy (PLAN) is conducting a joint exercise with another navy.

The first one was conducted with Pakistani war ships off the coast of Shanghai recently.

China and India have been seeking to settle their border dispute and expand mutual investment.

Indian Prime Minister Atal Behari Vajpayee visited Beijing earlier this year and held talks with Chinese leaders.