BEIJING - FROM next year, Singapore's exports to China will become more competitive and its businesses will enjoy better access to the booming Chinese market under a newly signed free trade agreement (FTA) between the two countries.

Prime Minister Lee Hsien Loong and his Chinese counterpart Wen Jiabao witnessed the signing of the landmark China-Singapore FTA here on Thursday morning.

The agreement is China's first with an Asian country.

The FTA, which comes into force next January, will first eliminate tariffs for 85 per cent of Singapore exports to China.

An additional 10 per cent of exports will become duty-free by 2010.

Key export categories that would benefit from the agreement include petrochemicals, processed foods, electronics and electrical goods.

On Singapore's side, it will eliminate tariffs for all Chinese exports from next year.

his means well-known Chinese beers like Tsingtao and Yanjing will have easier access to the Singapore market, and consumers can buy them at cheaper prices.

Commenting on the FTA's significance, PM Lee, who is in Beijing on a five-day official visit, said it was testimony to the strength of Sino-Singapore ties, adding: 'This is a major step forward, and I hope one of many future steps that would further deepen and enhance our relationship'.

The pact, concluded after two years and eight rounds of negotiations which began in October 2006, 'is set to bring about advantages for Singapore businesses and consumers', said a statement from the Singapore's Ministry of Trade and Industry on Thursday.

'This FTA also comes at a particularly important time, as it underscores Singapore's commitment to the trade liberalisation process amidst an increasingly challenging global economic environment,' said MTI.

The agreement was signed by Singapore Minister for Trade and Industry Lim Hng Kiang and Chinese Minister for Commerce Chen Deming at the Great Hall of the People in Beijing.

Building on the AseanChina FTA, the bilateral comprehensive agreement covers areas including trade in goods, rules of origin, trade remedies, trade in services, movement of natural persons, investment, customs procedures, technical barriers to trade, sanitary and phytosanitary measures and economic cooperation.

'It will enhance bilateral economic relations by further reducing and removing barriers to trade.

'This will create opportunities for businesses from both countries to grow their links in each other's markets', said MTI.

Trade between the two countries rose to a record high of $91.6 billion in 2007.

China is currently Singapore's third largest trading partner, while the Republic is Beijing's eighth largest trading partner.

China is also Singapore's top investment destination.

Singapore, which is China's 7th largest investor, has invested more than $49.6 billion in the mainland as at end 2007.

Mr Wen said during his meeting with PM Lee before the signing on Thursday morning that the pact signalled a leap forward in the bilateral ties between the two countries, Xinhua news reported.

He said relations between China and Singapore has always been friendly, cooperative and creative.