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Last Updated: Friday, 24 November 2006, 15:42 GMT
China and Pakistan in trade deal
Pakistani children line up to greet President Hu Jintao
President Hu received a ceremonial welcome in Pakistan
Chinese President Hu Jintao has signed a free trade deal with his Pakistani counterpart, Gen Pervez Musharraf, during talks in Islamabad.

Diplomats say the agreement could triple the value of bilateral trade within five years, to $15bn (7.7bn).

The two countries have also agreed new defence and energy deals and pledged to continue nuclear co-operation.

Mr Hu arrived in Pakistan on Thursday after three days of political and trade talks with neighbouring India.

"Our relations are higher than the Himalayas, deeper than the Indian Ocean and sweeter than honey," Mr Hu said in a televised address to the Pakistani nation on Friday.

His visit to Pakistan is the first by a Chinese leader in a decade.

Nuclear speculation

The two men agreed a number of defence and trade deals, but stopped short of announcing a new nuclear agreement.

Instead, they simply said they would continue working on existing nuclear projects.

We are good neighbours, close friends, trusted partners and dear brothers
President Hu Jintao

Chinese funds and expertise helped complete a nuclear power station in Pakistan's eastern province of Punjab in 1999.

In April this year, the two countries said they would work together to build another such plant nearby.

There had been widespread speculation that the two countries might agree a nuclear deal similar to the one between the US and India.

The BBC's Barbara Plett in Islamabad says Pakistan wants China to help it build more nuclear power reactors to meet growing energy demands, especially since the US has refused to provide Islamabad the kind of civil nuclear assistance it has promised India.

Economic considerations

The new trade pact would ignite efforts to cut tariffs, Pakistani commerce minister Humayoun Akhtar said.

"Within five years, trade between the two countries will be completely tariff free," he said.

Pakistani policemen stand alert under a welcoming billboard showing pictures of Chinese President Hu Jintao (l) flanked by Pakistani President Pervez Musharraf (R

Mr Hu said the free trade pact "serves the fundamental interests of our two peoples and is also conducive to the peace and development of our region".

According to the BBC's economics correspondent, Andrew Walker, bilateral trade agreements are viewed with some suspicion by the World Trade Organisation (WTO) - of which Pakistan and China are members.

Such deals violate a central principle of the WTO - that there should be no discrimination between trade partners in the organisation.

However, our correspondent says, bilateral deals are popular because they offer countries an alternative avenue for expanding trade at a time when worldwide talks in the WTO have been suspended.

Old rivalries

Pakistan and China have also agreed to co-produce an airborne early warning system.

They already share other ventures in the defence field including the joint development of a fighter aircraft.

China has also ploughed millions of dollars into a project to build a massive shipping terminal in south-west Pakistan to gain access to the Arabian Sea.

Our correspondent says Mr Hu's visit to Pakistan may have been intended to reassure his hosts over China's warming ties with Pakistan's regional rival, India.

Historically, China and Pakistan formed a bloc against India - but economic considerations are now more important than Cold War-era rivalries.

Mr Hu's four-day visit to Pakistan was preceded by a landmark trip to the Indian capital Delhi, and financial centre Mumbai (Bombay) during which the two sides pledged to double trade to $40bn a year by 2010.

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