China and India signed in Beijing on Tuesday a joint statement that pledges to expand financial cooperation between the world's two largest developing countries.

In the statement signed at the second China-India Financial Dialogue in Beijing, the two countries vowed to boost exchanges and cooperation on bond markets development, capital markets opening and financial supervision.

Both sides agreed to develop bond markets and expand channels for direct financing, gradually open domestic capital markets and boost financial supervision to guard against risks brought about by short-term cross-border capital flows.

The two countries also pledged to improve macro-economic controls, promote renewable and clean energy development and usher in more sustainable resources-saving and environment-friendly production and consumption models.

Li Yong, Chinese Vice Minister of Finance, and Indian Financial Secretary Dr. D. Subbrarao co-chaired the meeting.

Li acknowledged that China and India face similar challenges brought about by fast economic growth.

The statement says that both sides have realized that the spreading subprime crisis, high oil and commodity prices, global economic imbalance and rising trade protectionism pose potential threats to global economic growth.

The robust economic growth in China and India will help the globe better guard against economic recession, according to the statement.

Subbrarao told Xinhua that the two neighbors at home face common tasks to prevent inflation, manage capital flows, save energy and realize sustainable growth.

By drawing on each other's development experiences, the two countries can deal with the challenges and play their role in maintaining a steady world economic growth, Subbrarao added.

Rodrigo de Rato, head of the International Monetary Fund (IMF), said at the IMF annual meeting recently that though the world economy has slowed down its pace in the short term, the performance of rising economies including China and India is encouraging.

"The financial cooperation between China and India will not only help them realize sustainable development, but also help stabilize the Asian financial market," Sun Shihai, deputy director of the Institute of Asia-pacific Studies of the Chinese Academy of Social Sciences, told Xinhua.

The China-India Financial Dialogue mechanism was established based on a Memorandum of Understanding on Financial Dialogue signed between the two countries during Chinese Premier Wen Jiabao's visit to India in April 2005.

The third China-India Financial Dialogue will be held late 2008 or in the first half of 2009 in India, according to the statement.

The Chinese Ministry of Finance said the dialogue will be held once every 12 to 18 months at a deputy ministerial level or other levels the two sides agree upon.

The first such dialogue was held in New Delhi, capital of India, on April 7, 2006.