China, Gulf states to discuss free trade pact

China will sign a trade and economic cooperation pact with a bloc of Gulf Arab states and start talks on a free trade agreement this week as it seeks to secure sources of oil and broaden its trade relationships.

The deal between China and the Gulf Cooperation Council (GCC) would reduce tariffs and simplify the flow of goods and investments, the China Daily newspaper said on Monday.

The GCC groups Kuwait, United Arab Emirates, Bahrain, Oman, Qatar and Saudi Arabia.

Energy demand in the world's most populous country has outpaced supply, creating power shortages in three quarters of mainland China's 31 provinces and regions last year.

China, the world's second largest oil consumer, is establishing strategic oil reserves and trying to diversify its supply, much of which already comes from the Middle East.

The free trade deal would be China's second with a regional group after a pact it has in the works with the Association of South East Asian Nations, it said.

"We are prepared to provide China with its energy needs," it quoted Faisal al-Ghais, council representative and Kuwait's ambassador to China, as saying.

China and the Gulf Cooperation Council could strengthen cooperation in oil exploration and investment, he said ahead of a visit this week to Beijing by a team of finance ministers and other officials from the GCC and by Secretary-General Abdul Rahman al-Attiya.

Kuwaiti Prime Minister Sheikh Sabah al-Ahmad al-Sabah will also visit China this week.

The newspaper said China's trade with the Gulf Cooperation Council was $17 billion last year, an increase of 46 per cent from 2002.