India and China on Saturday agreed to have a joint economic project in Afghanistan, sources said after a two-day summit between Prime Minister Narendra Modi and Chinese President Xi Jinping in Wuhan.

The long-standing border issue and terrorism was also discussed during the summit.

India and China’s decision of agreeing to undertake a joint India-China economic project in Afghanistan is likely to upset Pakistan.

The understanding was reached between the two leaders during the two-day informal summit which concluded today, they said.

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As per the understanding, officials of both sides will identify the project in following up discussions and work out modalities.

This will be the first such project in the war-torn country where China while trying to expand its influence has tacitly backed Pakistan, which has been accused by Afghanistan and the US of backing the Taliban and its most violent attacks in the country destabilising any attempts to restore peace.

The long-standing border issue also figured in the meeting where Modi and Xi decided to give “strategic guidance” to their armies to prevent a Doklam-like military stand-off in 2017.

“The two leaders endorsed the work of the Special Representatives in their efforts to find a fair, reliable and truly acceptable settlement. They also underscored that in the meantime it is important to maintain peace and tranquility in all areas of the India-China border region,” India’s Foreign Secretary Vijay Gokhale said in Wuhan.

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“And to this end, the two leaders decided that they would issue strategic guidance to their respective militaries to strengthen communication and to build trust and understanding to implement the various confidence-building measures which have already been agreed upon the two sides and to strengthen existing institutional mechanism to prevent and manage situations in the border areas,” he added.

On Friday, the two leaders agreed that healthy bilateral ties were important for a better world as they met to re-set the ties between the two nations hit by the military face-off.

(With inputs from agencies)