NEW DELHI - India's Prime Minister Manmohan Singh is likely to meet his Chinese counterpart Wen Jiabao on Saturday, hoping to douse an escalating verbal duel between the Asian giants centered around their decades-old border dispute.

The meeting on the sidelines of a regional summit in Thailand would be the first high-level contact between the two nations after recent months of diplomatic barbs led to unusual levels of tension and fears that the rivalry could spin out of control.

Relations have warmed in recent years, mostly on the back of mutual trade expected to pass $60 billion next year, a 30-fold increase since 2000.

But tensions have risen in the last few months amid reports in Indian media of Chinese border incursions, and an objection by Beijing to Tibetan spiritual leader the Dalai Lama's planned visit next month to the Indian state of Arunachal Pradesh that China claims as its own territory.

Beijing also criticized a visit by India's Prime Minister Manmohan Singh to the mountainous state this month, drawing strong protests from New Delhi [ID:nDEL503010].

The visit of the Dalai Lama is seen as not only reinforcing India's claim on Arunachal Pradesh, but also boosting the Tibetan struggle by undermining Chinese territorial integrity, said Bhaskar Roy, a New Delhi-based strategic analyst on China.

Some view China-India rivalry in the context of who will lead Asia. A calibrated escalation of the border dispute may also reflect Beijing's wider concern about a younger, restive generation of Tibetans the Dalai Lama does not control.

And Beijing would like to ensure that this new generation of Tibetan exiles based in northern India is not used as a bargaining chip by New Delhi in future, analysts say.

All of this is reflected in its reaction to its failure to assimilate Tibet, said strategic analyst Prem Shankar Jha.

The Chinese hold India responsible because it has kept the Tibetan culture and political identity alive by sheltering the Dalai Lama. This was the bone of contention that led to the 1962 war. It is almost certainly the real bone of contention today.

DIFFERENCES FOCUS ON DALAI LAMA, INDIAN TIES WITH U.S.

The Dalai Lama fled Tibet in 1959 after a failed uprising against Chinese rule.

Mutual mistrust lingers from a short war the two sides fought in 1962 and the presence of the Dalai Lama in India irks Beijing, as does India's growing relations with the United States.

This meeting would be about building confidence that has taken a knock in recent months -- weeding out misapprehensions, clearing of the air, Roy said.

But it is not going to be easy because the sparring went too far this time. It will take time. Tension will not go away.

The two sides have also struggled to settle their border dispute. Each side claims vast swathes of the other's territory along their 3,500-km (2,173-mile) Himalayan boundary.

China lays claim to 90,000 sq km of land on the eastern sector of the border in the Indian state of Arunachal Pradesh. India says China occupies 38,000 square km (15,000 square miles) of territory in Aksai Chin plateau.

While a new war is very unlikely, the unsettled border between the world's two most populous countries has the potential to fuel tensions destabilizing further a region already roiled.

But the Chinese are seeking to play down things.

I wish to point out that at present Chinese-Indian relations have maintained a healthy direction of development, Chinese foreign ministry spokesman Ma Zhaoxu said on Tuesday.

High-level mutual visits, frequent contacts and trade and economic cooperation continue to develop...On major international and regional issues, both sides maintain closer coordination and cooperation.

(Additional reporting by Emma Graham-Harrison in Beijing; Editing by Alistair Scrutton and Ron Popeski)

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