China and India will reopen an historic trading route through Tibet that has been closed for 44 years, in a further sign of warming ties between the world's two most populous nations.

The Nathu La border pass, once part of the famed Silk Road trade route sitting 4,545 meters (14,998 feet) above sea level, was closed in 1962 when the two countries fought a brief border war in the Himalayan region.

But with relations improving in the economic, political and even military fields, the two sides decided it was finally time to reopen the pass, which sits between the Indian state of Sikkim and China's Tibet.

The reopening of Nathu La, due for Thursday, was initially agreed to in 2003 during an historic visit to Beijing by then-Indian prime minister Atal Bihari Vajpayee.

Since then, the two nations have pushed for greater trade to tap a total consumer market of 2.3 billion people. Bilateral trade reached 18.73 billion dollars last year, up 37.5 percent from 2004, according to Chinese statistics.

Nathu La was a major trading point between the two countries before the 1962 war and its reopening is aimed at restoring the region's former trading glory.

A study conducted by the Sikkim government said trade via the pass could reach 12 billion dollars by 2015.

Chinese state press reports, citing Tibetan trade officials, have given more modest assessments, saying goods traveling through the pass could eventually make up 10 percent of overall trade between the two nations.

However, China intends to make Yadong, the border city on the Tibetan side that is also known as Chomo in Tibetan, the biggest free-market border town in southwest China, state press said.

To this end, Beijing announced last week that it planned to extend the just opened Qinghai-Tibet railway that runs from the western outpost of Golmud to the Tibetan capital of Lhasa another 460 kilometers to Yadong within 10 years.

Chinese press reports further said China was eager to import iron ore through the pass, instead of having the resource shipped by sea to Chinese ports along its eastern seaboard.

Nevertheless, business at the pass is initially expected to be far more modest and resemble more the goods that were traded during the Silk Road days.

India will be able to export 29 items including textiles and blankets, agricultural implements, liquor, cigarettes, tea, barley, rice, vegetable oil and local herbs.

Chinese traders will offer 15 items -- from horses to goats and sheep, yak tail, yak hair, goat skin, wool, and raw silk.

And under the agreement, trade will begin every year on June 1 and continue only until September 30 -- after which the area becomes impassable due to heavy snow, strong winds and freezing weather.

Indian traders Tuesday carried out mock trading at the Sherathang market five kilometres below the Nathu La pass, to test out facilities there that include a customs and immigration post, a bank and telecommunications outlets.

One man eagerly looking forward to the reopening of the pass is 80-year-old Motilal Lakhotia, who used to trade through the route before its closure and is still a prosperous businessman in Gangtok, the capital of Sikkim.

Lakhotia, now a prosperous businessman in Gangtok, had a shop at Yadong, known in India as Yatung, before it was shut down by the border war, and will travel to Nathu La on Thursday.

"I am very excited to be part of history and for me age is no deterrent. In fact I am feeling rejuvenated after my name was proposed in the first list of traders," Lakhotia told AFP by telephone from Gangtok.

"I dealt with items from cereals to blankets, textiles and woolen clothing when I ran the shop from 1954 to 1961," said Lakhotia, who is fluent in both Mandarin and Tibetan.

"At that time we were given silver coins in exchange for goods sold."

Meanwhile, the two nations continue to negotiate over the territorial dispute that sparked their 1962 conflict, although both sides say progress is being made.

India says China occupies 38,000 square kilometres (14,670 square miles) of Indian territory. Beijing claims the remote Indian state of Arunachal Pradesh.