Islamabad: Pakistan and China have concluded a crucial USD 1.58-billion currency swap deal and multi-million dollar pacts to upgrade the strategic Karakoram Highway and a power plant, amid severe strains in US-Pak ties.

The two "all-weather" strategic partners signed six bilateral agreements, including the 10-billion-yuan currency swap deal between China's central bank and State Bank of Pakistan, Friday.

The pact was inked during a visit to Islamabad by China's top diplomat, State Councillor Dai Bingguo, who arrived here on Friday.

During delegation-level talks with Dai, Prime Minister Yousuf Raza Gilani said "China was a cornerstone of Pakistan's foreign policy" and both countries enjoyed "unanimity of views on regional and global issues".

Dai said the two said should strengthen strategic coordination and expand practical cooperation. China will step up cooperation with Pakistan in energy, infrastructure and agriculture, he said.

"Going forward, China will reduce tariffs on Pakistani goods and increase imports from Pakistan within the framework of the China-Pakistan free trade area," Dai said at a reception marking the closing of the "Year of China-Pakistan Friendship".

China-Pakistan aim to step up the bilateral trade to USD 15 billion by 2015 from USD nine billion last year.

Dai's visit to Islamabad coincided with fresh strains in Pakistan-US ties over a cross-border NATO air strike that killed 24 Pakistani soldiers last month.

Pakistan responded to the attack by closing all NATO supply routes and forcing the US to vacate Shamsi airbase, reportedly used by CIA-operated drones.

The Pakistan Army has rejected the findings of a US inquiry into the incident that admitted lapses by American troops.

Dai, who is in Islamabad as the representative of President Hu Jintao, said China's perceives Pakistan as an "iron-core" friend, a term reserved for Beijing's "most trustworthy" allies.

Referring to complex changes taking place around the world, he said: "Confronted with the complicated and volatile international situation, it is all the more important for all-weather strategic partners like China and Pakistan to handle our own affairs well...and to deepen and broaden our cooperation."

The currency swap agreement will last for three years and can be extended by mutual consent.

The deal is aimed at boosting trade and investment while ensuring regional financial stability, China's central bank said.

Since the onset of the global financial crisis in late 2008, China has signed currency swap agreements with 14 countries and regions, including Thailand this week and has carried out swaps with Argentina and Kazakhstan.

Pakistan and China concluded an inter-governmental framework agreement for the improvement and realignment of the Karakoram Highway. China will provide soft loans worth USD 349 million for the project.

Under another agreement, the Chinese government will provide a credit facility of USD 464 million to expand the Guddu thermal power plant in Sindh province.

Recent media reports have said Pakistan also plans to purchase two atomic power plants with a combined capacity of 2,000 MW from China despite concerns expressed by the West over nuclear cooperation between the two countries.

The new plants to be supplied by the China National Nuclear Corporation will be installed at the Karachi Nuclear Power Plant complex.

Pakistan and China also signed an agreement in 2009 to set up two nuclear power plants at the Chashma complex in Punjab despite concerns expressed by the West that the deal violated international nuclear regulations.

Work has already begun on these plants, which are expected to be completed by 2016-17.

Washington and EU countries have alleged that China has grossly undervalued its currency to derive unfair exports advantage.

(Agencies)