The contract to build a railway network extending 5,300 kilometres (3,293 miles) was signed when a Chinese delegation visited Tehran, the Construction and Development of Transportation Infrastructure Company statement said.

It did not say when Beijing's team was in the Iranian capital.

The agreement comes at a time when world powers, including China, have imposed sanctions on Iran over its controversial nuclear programme.

"We signed a 130,000 billion rials (around $13 billion) contract to build more than 5,300 kilometres of railway network," the statement said, quoting the firm's managing director Masoud Rahnama, who did not elaborate on the deal.

China, which has maintained that Iran's nuclear controversy be solved by dialogue, has emerged as the largest trading partner of the Islamic republic.

Direct bilateral trade currently stands at $30 billion, state television quoted Assadollah Asgaroladi, the head of Sino-Iranian Chamber of Commerce, as saying.

In 2009, bilateral trade stood at $21.2 billion, according to official estimates, a jump from a mere $400 million around 15 years ago.

Asgaroladi said that China was also trading indirectly with Iran through the United Arab Emirates to the tune of around $7 billion annually.

The UN sanctions along with unilateral punitive measures by several Western and European countries have allowed Chinese companies to expand their presence in the Islamic republic.