Chinese investors are to set up woven and knitted garment factories in Punjab, Pakistan's largest textile-producing province, following an agreement signed with the China National Textile & Apparel Council (CNTAC).

The Punjab-China Garments Industrial Zone will be located on 500 acres of land near Lahore and will be marked as a Special Economic Zone.

It will be jointly established by the Punjab Industrial Estate Development and Management Company (PIEDMC) and the China Knitting Industry Association.

Shahbaz Sharif, chief minister of the Punjab, said the provincial government will provide special incentives to local and foreign investors in the proposed garment industrial zone.

While Gao Yong, vice president of the CNTAC, hopes the initative will increase Pak-China bilateral trade in textile and clothing by US$7bn per annum.

More than 70% of Pakistan's textile industry is based in Punjab. The country is also targeting US$25bn in textile and clothing exports in the next five years under its Strategic Trade Policy Framework (STPF) - more than doubling the US$13.06bn in exports booked in the most recent fiscal year from July to June.

Investors are likely to be attracted by Pakistan's imminent duty-free access to the EU market from 1 January next year.