China 'ends illegal tax breaks'

Under the deal, China will remove the subsidies, which the US called "market distorting" by the end of the year.

The move is a major breakthrough for US-China trade relations, which have been strained recently, analysts said.

It ends a spat that began when the US took the matter to the World Trade Organization (WTO) in February.

US trade representative Susan Schwab said that China had agreed to remove the subsidies granted to Chinese exporters that encouraged them to sell products abroad more than they would otherwise.

The deal also would remove tax-breaks given to Chinese companies that used locally-made goods instead of imported ones.

"This outcome represents a victory for US manufacturers and their workers," said Ms Schwab.

"The agreement also demonstrates that two great trading nations can work together to settle disputes to their mutual benefit."