China and the six-member Gulf Co-operation Council (GCC) are to launch a consultation mechanism on a possible free trade agreement.

The Chinese Minister of Commerce Bo Xilai has proposed negotiations begin in September.

China and GCC signed a framework agreement on economic co-operation on Tuesday, which enables talks on establishing the arrangement.

According to the bilateral agreement on co-operation in economy, trade, investment and technology, the two sides will establish a joint committee on economic and trade co-operation and launch a consultation mechanism.

Bo proposed first consultation start during his September meeting with visiting GCC financial ministers and Secretary-General Abdul-rahman Al-attiyah.

He told the GCC delegation that China hopes to reach the agreement on a free trade area at an earlier date.

Bo also expects the committee to outline a blueprint for Sino-GCC trade economic development and solve problems in the process, acting as accelerator and buffer for the bilateral economic ties.

Bo said co-operation on oil and gas fields will be a pillar in the future.

"We should foster closer partnership in the sector through the construction of big projects," Bo said.

China-GCC trade surged from US$1.5 billion in 1991 to US$16.9 billion last year, expanding by more than 10 times, according to Chinese statistics.

China's trade with the GCC was US$17 billion last year, an increase of 46 per cent from 2002.

The GCC - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - has become China's eighth largest trade partner worldwide.

But Bo said China-GCC trade still has big potential as bilateral trade volumes are still small compared with each side's total trade volume.

Bo noted that Chinese garments, fabrics, electronic and telecommunication facilities and GCC's oil, natural gas and chemical products are of great need of each other's markets.

Bo said he believed there would be a dramatic expansion in bilateral trade in the next five years.

"The GCC members are rich in funds and we hope more GCC enterprises invest in China, especially in hydropower, energy and mining, transport and telecommunications," Bo said.

China would also encourage companies to invest in GCC countries, he said.

"And China's high technology and GCC's rich funds will be a good match," Bo said.

Chong Quan, a spokesman for the ministry, said signing of the framework would bring Sino-GCC trade relations into a new stage. It was also another big move for China to participate in regional co-operation.

China has already been conducting negotiations on free trade area with the Association of Southeast Asian Nations (ASEAN) and is also talking with New Zealand, Australia and Chile.

The free trade deal with GCC would be China's second with a regional group after the pact it has in the works with the ASEAN.

GCC delegates participating in the meeting said their co-operation with China would be a long-term strategy.

"It is the first time all ministers of finance and the Secretary-General have visited a country together, which embodies the importance we put on co-operation with China," they said.

A Bahrain delegate said the meeting helped find ways to solve problems faced by investors of both sides and also opened various channels of communication between the two sides, bringing the private sectors closer than ever.

A Kuwait official said he is confident that the GCC-China free trade area would be established since both sides have adopted practical attitudes.

(China Daily July 8, 2004)