A general view of Gwadar port in Gwadar, Pakistan on October 4, 2017 Photo: VCG

The suspension of bilateral trade between India and Pakistan could hurt businesses in both countries, but most importantly it will increase the tension in the region, experts warned on Thursday.  

China, which has sought to prevent ties between the two countries from deteriorating further, will make every effort - including economic means - to improve the regional situation, they said.

"The trade suspension is a signal of worsening bilateral relations, but it won't have a major impact on either economy as the two have a limited trade volume. However, it signals an increase of tensions," Long Xingchun, a research fellow at the Charhar Institute and director of the Center for Indian Studies at China West Normal University, told the Global Times on Thursday.

Pakistan decided to suspend bilateral trade and downgrade its diplomatic relations with India, the Pakistan Prime Minister's Office said in a statement on Wednesday.

Indian and Pakistani troops recently exchanged fire and shelled each other several times near the Line of Actual Control in Jammu Kashmir, and trade relations between the two countries were already strained, according to media reports.

"Suspending trade could be just the first step, as Pakistan is testing different countries' response, but we advocate that all parties should work hard to reduce regional pressures, rather than aggravate these pressures," Dai Yonghong, a professor and academic member of the China Center of South Asia Studies at Sichuan University, told the Global Times. 

In the hope of preventing the regional situation from getting worse, China has sought to mediate between the two countries in recent years.

India and Pakistan should refrain from taking actions that will unilaterally change the status quo and escalate tensions in Kashmir, a Chinese Foreign Ministry spokesperson said Tuesday in response to a question.

China and Pakistan signed a free trade agreement (FTA) in November 2006, covering trade in goods, investments and services.  

The second phase of the FTA between Pakistan and China was signed in April this year. Under that document, China offered Pakistan access to 90 percent of its market and in return asked for only 65 percent access to Pakistan's market.

A list of 313 items was involved in the agreement, including commodities ranging from agricultural products and textiles to leather.

China will continue to help Pakistan improve its investment environment and strengthen its manufacturing ability through the China-Pakistan Economic Corridor, Long said.

Experts also urged that India should take a cautious attitude and should never trespass into Chinese territory, which is the country's bottom line and an issue on which it will never give in.

"The China-India relationship has improved after the Wuhan summit last year. A worsening China-India relationship will only hurt India's economy and hurt the China-India economic ties that China has been trying hard to maintain," Dai said.