China and Chile have decided to initiate talks on a free trade agreement, leaders of the two countries announced in Santiago Thursday.

President Ricardo Lagos Escobar called the decision an "important step" for Chile, which will become the first South American nation to start such negotiations with China.

Lagos also confirmed that Chile has already decided to formally recognize China's status as a full market economy.

He and President Hu Jintao witnessed the signing of several agreements, under which China includes Chile on its list of outbound tourist destinations and the two countries agree to boost cooperation in fields including agriculture, mineral resources and medicine.

The two leaders also promised to promote a full-range cooperative partnership.

Hu said their relationship is currently in its "best period" in history since the two countries established full diplomatic relations 34 years ago.

"The fact that we signed a number of agreements here today demonstrates China and Chile have begun sincere and mutual cooperation on an equal footing," Hu said, adding that "China-Chile relations will have a bright future."

Chile was China's third largest trading partner among South American nations; trade between them reached US$3.5 billion in 2003, up 37.6 percent on the previous year.

(Xinhua News Agency November 19, 2004)