Paris and Peking released a joint statement saying that the two sides had decided 'to restore their traditional relations of friendly co-operation' following secret, high-level talks. The French Prime Minister, Edouard Balladur, was expected to visit China, perhaps in March, to underscore the improved relations.
Ties between the two countries soured after France's Socialist government decided in late 1992 to sell 60 Mirage jet fighters built by Dassault Aviation to Taiwan in a deal worth an estimated dollars 2.6bn ( pounds 1.75bn).
The deal angered Peking which has viewed Taiwan as a renegade province since the end of the Chinese civil war in 1949. To punish Paris, Peking shut French firms out of important contracts last year and closed France's consulate in Guangzhou, part of the country's most economically vibrant region which borders on Hong Kong.
China's action, described by French businessmen as a virtual boycott, was considered the sharpest against a Western nation in 11 years.
Acknowledging China's 'worries', France promised not to authorise any more arms sales to Taiwan. In return, Peking reopened the doorfor French firms to take advantage of the opportunities offered bu China's booming economy, saying French firms could now compete on an equal footing.