The agreement, which will eventually all but eliminate tariffs between the two nations, will also have positive effects in other areas, said New Zealand Prime Minister Helen Clark, who attended the signing ceremony in Beijing.

"The FTA... promotes co-operation in a broad range of economic areas, and also provides a platform for further engagement at the governmental, cultural, and people-to-people levels," she said in a statement.

The agreement came after 15 rounds of negotiations stretching back nearly four years and despite some criticism of Clark for pushing ahead with the pact during China's crackdown on unrest in Tibet.

"It was with a great sense of ambition that we embarked on this particular phase of the relationship," Clark told her Chinese counterpart Wen Jiabao in Beijing's Great Hall of the People.

Wen called it "a historic day," arguing the agreement will "deliver tangible benefits to both our countries."

New Zealand has committed itself to abolishing all tariffs imposed on imports from China by January 1, 2016, the Chinese ministry of commerce said on its website.

China will scrap tariffs on 97.2 percent of imports from New Zealand by January 1, 2019, according to the commerce ministry.

When the deal comes into force, tariffs for 63.6 percent of products imported to New Zealand from China and 24.3 percent of imports into China from New Zealand will be cut to zero, the ministry said.

These forecasts were based on the assumption that the agreement would enter into force in 2008, a ministry official told AFP.

"It is expected to take effect within this year, but it depends on how long preparations in both countries will take," said the official, who asked not to be named.

New Zealand Trade Minister Phil Goff, who is travelling with Clark, emphasised the historic nature of the agreement.

"Being the first developed country to sign a comprehensive FTA with China is an enormous achievement for New Zealand," he said.

"By reducing barriers to trade in goods, services and investment in China, the FTA will give New Zealand businesses a distinct advantage over competitors into that market."

Two-way trade between the two nations hit 7.5 billion New Zealand dollars (5.9 billion dollars) in 2007, according to official estimates from Auckland, although the final data have not yet been released.

With the new deal, bilateral trade is expected to grow in the coming years, government officials said.

New Zealand has a history of firsts when it comes to economic relations with China. It was the first nation to conclude a bilateral WTO accession agreement with China and the first to recognise its market economy status.

Clark led a delegation of 150 business and government representatives to Beijing for the signing ceremony, the New Zealand Press Association said.

Business groups in New Zealand welcomed the conclusion of the deal.

"Following the free-trade agreement, the potential will exist for China to become our biggest customer," said Phil O'Reilly, chief executive of Business New Zealand, a business-advocacy organisation.

But some minor political parties and a large section of the public oppose the deal, partly because of human rights concerns as well as fears that New Zealand businesses could be hurt by rising Chinese imports.

The New Zealand Green Party said New Zealand should not be signing a deal amid the Chinese crackdown on unrest in Tibet.

"The Greens think it is completely inappropriate for New Zealand to be signing a free-trade agreement in Beijing today when Tibetans are being shot down in the streets," Greens foreign affairs spokesman Keith Locke said.

The United Future Party leader Peter Dunne said he had turned down his place on the trip in protest over China's treatment of the Tibetan people.

But Clark said that while New Zealand had a difference of opinion with China on human rights issues, that was not "standing in the way of New Zealand having a broad-based relationship with China."

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