VIENTIANE, Nov 29: China and 10 Southeast Asian countries signed historic trade pacts on Monday to pave the way for the world's biggest free-trade zone by 2010, covering nearly two billion people.

Chinese Prime Minister Wen Jiabao and his counterparts from the 10-country Association of Southeast Asian Nations (Asean) signed the agreements in the Laotian capital Vientiane.

"The agreements signed today show that ties between China and Asean have reached a new stage," Wen told reporters after the agreements had been inked. "It shows the relations have now entered into a new period of overall cooperation."

The pacts include an agreement to liberalize tariff and non-tariff barriers on traded goods and one to set up a mechanism to resolve trade disputes. The trade pact will form the first component of a comprehensive accord planned for completion by 2010 that will include the full liberalization of the services sector.

"Asean is an important trading partner for China. China is also an important trading partner for Asean," China's Finance Minister Jin Renqing told AFP. Asean's efforts to deepen trade and investment ties with China are considerably more advanced than similar efforts with its other Northeast Asian dialogue partners, with free trade negotiations with Japan and South Korea only expected to start next year.

If completed on time, the overall Asean-China deal will result in the creation of the world's biggest free trade zone, covering nearly two billion people. It will also enhance China's role as a major growth engine for Asean's export-led economies because of its growing appetite for raw materials, finished goods and components.

Chinese foreign ministry spokesman Liu Jianchao told reporters that poor Asean countries might be given some slack in entering the agreement, given their worries about being overwhelmed by the Chinese juggernaut.

"They have some worry, so we have to have some flexible policies," he said. "There might be some leeway or some extension of time for countries like Vietnam, Myanmar, Cambodia and Laos."

Annual two-way trade is expected to rise 28 per cent to $100 billion next year from $78.2 billion in 2003. "We cannot rely on the West alone," Philippines Gloria Arroyo told a gathering of business executives on Sunday, pushing for an East Asia free-trade bloc. The ultimate objective of the free-trade area is to reduce average custom duties among its members to between zero and 5pc.