ASSOCIATED PRESS in Canberra

Updated at 11.11am:
The government has for the first time predicted Australia will be able to strike a free trade agreement with China, a newspaper reported on Monday.

The two governments agreed in October 2003 to complete a study by March 2005 on the feasibility of such a deal.

Trade Minister Mark Vaile told The Australian newspaper that a trade pact with the mainland would be “arguably more important” than a similar deal between Australia and the United States which is due to come into force on Jan. 1.

“Australia, regardless of the challenges it confronts, must not miss this incredible opportunity,” the newspaper quoted him as saying.

Asked if he predicted a positive conclusion to an FTA with China, Mr Vaile told the newspaper: “I think there can be.”

The mainland is a major market for Australian raw materials such as iron ore, coal and natural gas.

China wants Australia to recognise it as a market economy so that it can avoid a range of World Trade Organisation restrictions that can apply to countries that interfere with free market forces.

China has been accused of dumping cheap products on world markets with the aim of increasing market share at the expense of competitors rather than making profits.

Mr Vaile said the government had not yet decided whether it would grant China market economy status in any deal.

China is Australia’s third-largest and fastest-growing trading partner and fourth-largest export market. Trade between the two nations totalled A$23 billion (HK$133 billion) in 2002.