BEIJING -- China and South Korea will start talks next year on the feasibility of a free trade agreement, state media reported.

Xinhua News Agency said an agreement on the talks was reached at a meeting late Friday between Chinese Commerce Minister Bo Xili and South Korean Trade Minister Kim Hyun Chong.

The negotiations were to be held at government and industry levels.

The exploratory talks "will look into the effect of the FTA on the macro-economies of both countries, the effect of trade liberalization on industries, (and) the arrangements for sensitive products and industries," Xinhua said.

China fought on North Korea's side during the 1950-53 Korean War against South Korea and U.S.-led U.N. forces. But China and South Korea have experienced a rapid boost in business links since 1992, when they normalized ties, with trading volume jumping from US$6.3 billion to US$111.9 billion (euro87.6 billion) last year.

China replaced the United States as South Korea's largest trading partner in 2004, while South Korea is China's sixth-largest trading partner and its fourth-largest source of overseas investment, Xinhua said.

South Korea is also working on a free trade agreement with the United States, and the two held a fourth round of talks last month but will not wrap up negotiations on an agreement this year as originally planned.