(Editor: Leona)

China and Australia are expected to sign a landmark free trade agreement in the second quarter of this year and implement it from the fourth quarter onwards, an Australian official said on Wednesday.

Both nations concluded the FTA talks in November and are expected to sign an agreement after completing the legal review and translation of the text, said Lachlan Crews, economic counselor of the Australian embassy in China.

After the necessary domestic formalities are completed, the two nations will work on the diplomatic measures that are necessary to implement the agreement, he said, adding that a suitable date for implementation would be fixed subsequently.

President Xi Jinping and Australian Prime Minister Tony Abbott had witnessed the signing of the declaration of intent on concluding the FTA talks in Canberra in November.

Under the FTA, Australia will eventually reduce tariffs to zero on all goods imported from China, and China will remove tariffs on the vast majority of Australian goods. It will also include opening-up of numerous service sectors, a simplified review procedure for investments, most-favored-nation treatment, favorable market access rules and market transparency.

Two-way investments between the two countries are set to increase with relaxed regulations, said Chuan Tran, executive officer of the Australian Chamber of Commerce South China.

The need exists for Australian expertise in the service industry to fill the gap as the Chinese economy is shifting from manufacturing to service, he said.

"The Australian senior living industry welcomes the free trade agreement with China," said Susan Malone, executive director for the China operations of Australian retirement property management company Independent Management Group.

"This will allow the aged-care operators set up their own companies without forming a joint venture with Chinese companies. This can also facilitate more operators to come," she said.

Responding to a question on the proposed free trade zone in Guangdong province, Crews said that Australia hopes that all the future FTZs, including those in Guangdong, Tianjin municipality and Fujian province, and other major economic developments in China would be considered for inclusion in the FTA during the review process. The two sides are committed to review the agreement within three years and conduct further reviews at least every five years, he said.

Some of the FTA commitments relate to the existing FTZ in Shanghai, such as those in value-added telecommunications and legal services, he said.

The Guangdong FTZ, which includes new areas in Nansha in Guangzhou, Qianhai in Shenzhen and Hengqin in Zhuhai, received approval from the State Council last year. The master plan and the negative list, on which many central government agencies had reached consensus, would be discussed by the State Council soon, Li Chunhong, director of the provincial development and reform commission, said on Tuesday.

On challenges, Crews said there will be "quite long phase-outs" in tariff cuts in sensitive sectors to both countries.

Tariffs on infant formula will be eliminated in four years and that on milk powder in 11 years, for example, to allow Chinese dairy producers enough time to manage the potential growth in imports.