By Subir Bhaumik BBC News, Calcutta

Indian troops have a long-standing border dispute with China

Wing Commander RK Das told the BBC that the exercise will take place between 20 and 28th December in China's Chengdu military region.

This is the first exercise of its kind between the world's two largest armies.

India and China fought a brief but bloody border war in October 1962 over a disputed Himalayan frontier.

During an Indian high altitude military exercise called Operation Chequerboard in 1987, the two armies nearly went to war again.

In between, both sides patrolled the desolate frontier aggressively and skirmishes were not infrequent.

The situation eased after the two countries signed a treaty for peace and tranquillity in 1993, agreeing to reduce troop levels on the borders.

'Major step'

The details of this month's joint exercise were finalised during a visit of a 12-member Chinese military delegation to India last weekend, Mr Das said.

"This is a major step forward in military cooperation between the two countries," says security analyst Jaideep Saikia.

"This indicates that India's growing military ties with the US will not affect the process of confidence building with China."

Mr Das said the exercise will involve a company of troops each, just over 100 officers and men, from both sides.

"The focus of the exercise will be a special anti-terrorism drill. The Chinese value our long experience in handling insurgency and terrorism," he said.

India and China signed an agreement on defence cooperation in May 2006 during the visit of former Indian defence minister Pranab Mukherjee to China.

Last year, China agreed to reopen the strategic Nathu La pass to border trade, thereby accepting Sikkim as a part of India.

But in the last year China appeared to be uncomfortable with India's growing strategic ties with US, cemented through a series of joint exercises, including the huge five nation naval exercise in the Bay of Bengal, this year.

In recent months, Indian border forces reported more and more Chinese "intrusions" across the disputed border even as Beijing stepped up its rhetoric on the disputed frontier, reiterating its claims to the northeast Indian state of Arunachal Pradesh.