U.S. and Chinese defense officials have agreed to open a telephone hotline to prevent misunderstandings that could lead to armed conflict. Daniel Schearf reports from Beijing.

US Defense Secretary Robert Gates (R) with Chinese Defense Minister Cao Gangchuan review an honor guard during a welcoming ceremony in Beijing, 05 November 2007

U.S. Defense Secretary Robert Gates and Chinese Defense Minister Cao Gangchuan announced the plan for a military-to-military hotline during Gates's first visit to China as pentagon chief.

No date of operation was given, but China's official Xinhua news agency said it would be the first of its kind that China has established with another country.

Gates told journalists the two sides would also step up military exchanges to improve mutual trust.

"We discussed the need to move forward and deepen our military to military dialogue including on that nuclear policy, strategy and doctrine," Gates said. "We agreed to enhance military exchanges at all levels."

The defense ministries also agreed to cooperate on looking for the remains of American soldiers lost in China during the Korean War, and to one day hold naval exercises.

But distrust persists between the two powers.

Gates said he voiced Washington's concerns about China's growing military might and lack of transparency.

China's official military budget has been growing by more than ten percent in recent years and increased by almost 18 percent this year to $45 billion. Some experts say the real figure could be four times that amount.

Gates said China's increasing economic clout requires it to take on a greater share of international responsibility.

He said on the issue of Iran's nuclear program both sides agreed to push Tehran to change its behavior. China, a major customer of Iranian oil, is reluctant to support further sanctions and continues to sell weapons to Iran that Washington says have ended up in Iraq and Afghanistan.

Beijing wants the United Syayes to end its policy of being ready to defend Taiwan in event of a Chinese attack.

Beijing claims the self-ruled democratic island as its own and says it must be reunited with the mainland, by force if necessary. Cao reiterated China's determination to reunify Taiwan with the mainland.

Cao says the Chinese government will act in accordance with its anti-secession law to take any necessary actions for unification of the country.

China says its military has only peaceful intentions and its growing budget is to improve equipment and living conditions for its soldiers.

Those intentions came under intense international criticism in January when China blew up one of its aging satellites with a missile-launched weapon.

Gates said he brought up concerns about the anti-satellite weapon with his Chinese counterpart, but the discussion ended there.

Gates is scheduled to meet Tuesday with Chinese President Hu Jintao before heading to South Korea and Japan later in the week.