An agreement was reached here during a meeting between Pakistan Finance Minister Ishaq Dar and Xu Ziqin, President of state-owned China Shipbuilding & Offshore International Company Limited (SCOC) -- the trade arm of China Shipbuilding Industry Corporation.
Sources in the finance ministry, however, said the deal is subject to final review form higher authorities in Beijing, following which a formal agreement will be signed.
They also said that Pakistan would make payments in four instalments and the delivery will be made in coming years. According to a vague statement issued by the finance ministry after the meeting, Dar said the visit by the CSOC delegation to Pakistan would strengthen bilateral economic and defence cooperation.
"Pakistan and China have reached an understanding on matters of defence cooperation relating to Pakistan Navy," the statement said. "Financial arrangements to this effect were also concluded," it added.
The statement quoted Xu thanking Dar for his contribution in concluding the arrangements, saying it was reflective of the "deep-rooted" China-Pakistan friendship.
The reports of submarines deal was in the air since the visit of Chinese President Xi Jinping to Pakistan in April. It was reported then that the contract could be worth USD 4 billion to USD 5 billion, the biggest arms export deal for Communist China.
Pakistan has been negotiating the purchase of submarines from China since 2011. No details were, however, given about the type of the submarines. But there have been reports that Yuan-class Type-041 diesel-electric submarines were being considered.
The-Type 041 'Yuan' class is described by IHS Jane's Fighting Ships as a diesel electric attack submarine, potentially with stirling air independent propulsion.
Last month, Pakistan and China signed an agreement for construction of six patrol vessels for Pakistan Maritime Security Agency (PMSA).
China is Pakistan's biggest supplier of military hardware, which includes battle tanks, naval ships as well as fighter jets. The two jointly manufacture J-17 Thunder warplane.