The proposal was included in a joint statement issued in Beijing during the visit of Indian Prime Minister Manmohan Singh, Xinhua News Agency reported.
"In move that may change the geo-political map in Asia and the world, China and India decided to move ahead with preparation for the BCIM Economic Corridor that compasses Bangladesh, China, India and Myanmar," Xinhua said.
China expressed readiness to step up investment, railway construction and industrial zone development in the region, the agency said.
In an earlier written interview with the Chinese media in connection with his visit, Singh had been quoted as saying that to move BCIM idea forward, India and China need to first get the support of Bangladesh and Myanmar and together study the various practical elements of such a corridor. Myanmar was formerly called Burma.
India's Business Standard said the multi-billion dollar project would link South Asia and East Asia for economic activity, and had figured prominently during talks between Chinese Foreign Minister Wang Yi and his visiting Bangladeshi counterpart Dipu Moni last week.
Xinhua quoted Wang as saying China regards Bangladesh as a natural partner and important for China's opening up westward.
China and India will continue to discuss with other parties to establish the BCIM, Xinhua reported. Further discussion on concepts and alignment of the economic corridor are envisaged, it said.