Beijing: In what could prove a key breakthrough in the thawing of frosty relations between the two Asian powers, China and Japan have agreed to resume diplomatic dialogue and establish a crisis mechanism to prevent a long-standing territorial dispute from spiralling out of control.

The agreement paves the way for a highly-anticipated meeting between Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe as world leaders gather in Beijing for the APEC Leaders' Summit on Monday.

State Councillor Yang Jiechi announced the four-point agreement after holding talks with Shotaro Yachi, Japan's national security adviser at the Diaoyutai State Guesthouse in the Chinese capital.

"For reasons known to all, China-Japan relations have encountered persistent and serious difficulty," the Chinese foreign ministry said in a statement. "In recent months, the two sides have conducted rounds of consultations through the diplomatic channel to overcome political obstacles in the bilateral relations."

Tensions between the two nations have increased in the two years Mr Abe has been in power, with historic tensions exacerbated by his visits to the controversial Yasukuni war shrine, where 14 people convicted of class-A war crimes are memorialised along with 2 million other Japanese who died in World War II. China, as well as Korea, routinely denounces Japanese officials' visits to the shrine, which they view as a symbol of Japan's military aggression during the first half of the 20th century.

China and Japan have also been locked in an intensifying dispute over a group of uninhabited islands in the East China Sea, known as the Senkaku in Japan and Diaoyu in China. The stand-off over the islands is considered by many security analysts as one of the main potential flashpoints in the region.

The statement by the Chinese foreign ministry said the two countries had agreed to acknowledge that "different positions" existed between them regarding the territorial dispute and to "make efforts to build political mutual trust".

The leaders also agreed to build a crisis-management mechanism - a "hotline" - to avoid accidental clashes over the islands, Japanese and Chinese officials said.

China's declaration of an air defence identification zone over the islands late last year momentarily drew Australia into the spat. Foreign Affairs Minister Julie Bishop was rebuked by Beijing for criticising the move as potentially destabilising to the region.

Mr Xi and Mr Abe have not held an official bilateral meeting since respectively coming to power. Japanese public broadcaster NHK said Tokyo and Beijing had agreed to discuss final arrangements for the meeting.

The leaders' meeting will take place on Monday and Tuesday.

The back-room dealings behind Friday's agreement remain unknown. But analysts in Japan said Mr Abe would most likely agree privately not to visit Yasukuni - he has not attended events at the shrine this year - even if he cannot say so publicly for fear of angering his nationalistic supporters.

with Washington Post