Pakistan and China are looking at setting up a free trade area between the two countries, Pakistani Foreign Minister Khurshid Kasuri said in Beijing late on Thursday.

"We talked (with Chinese leaders) about the possibilities of establishing a free trade area between Pakistan and China," Kasuri told China Daily in an interview.

"Pakistan welcomes more investment from China, especially from the private sector, as China is now not only a large investment receiver, but a large investor," said Kasuri, who was on a three-day visit to China that ended on Friday.

"We talked about the specific projects which will be built with the US$500 million loan China gave to Pakistan last year," said Kasuri, adding: "These mainly will involve infrastructure projects."

China offered a preferential loan of US$500 million to Pakistan for bilateral trade and economic co-operation during Pakistani President Pervez Musharraf's visit to Beijing last November.

Kasuri denied that US Secretary of State Colin Powell's announcement of Pakistan's status as a Major Non-NATO Ally during a visit to the country last month would harm any of Pakistan's existing relationships.

"This is a unilateral decision that we have welcomed. It is neither a military alliance nor will it affect our relations with any other country."

The US has also given this status to Israel, Egypt, Japan, Australia, South Korea, Jordan, Argentina, New Zealand, Bahrain, the Philippines and Thailand.

"The purpose of this decision by the US administration is to facilitate the purchase of military equipment by Pakistan from the United States, particularly to assist us in the fight against terrorism," said Kasuri.

"Pakistan does not have any plans to hold joint military exercises with the United States at the moment," Kasuri said. But the minister did not rule out the possibility of this in the future. Joint military exercises are just "normal exchanges" between countries, he said.

But he reiterated that Pakistan will not allow any foreign troops onto its soil.

Kasuri denied reports that some foreigners captured in a recent major operation on the Pakistan-Afghanistan border were from China's Xinjiang Uygur Autonomous Region. "We have not yet established the identities of the foreigners... but they do not appear to include any of Chinese origin," Kasuri said.

"Pakistan will never allow its territory to be used against Chinese interests," he insisted.

Pakistan and China signed an extradition treaty last November, which provides for extradition of wanted criminals.

Turning to the Pakistan-India peace process, which the two countries agreed to restart in January, Kasuri said he "anticipated increased trade and economic activities involving the two countries."

Kasuri does not think the time is right for President Musharraf to visit India in the near future. "He would be willing to go, as he did in the past." he added.

"That depends on India. It depends on the progress of the peace talks," he said. "A lot of work has to be done (to create the atmosphere) for such a visit," he said.

During his visit, Kasuri held talks with his Chinese counterpart Li Zhaoxing and met Premier Wen Jiabao. The talks focused on economic co-operation between Pakistan and China, the rebuilding of Afghanistan and fighting terrorism, he said. He also made a stopover in Shanghai on Wednesday to discuss trade issues.

(China Daily April 10, 2004)