BRUSSELS - European Union countries will agree next month to talks with China on a pact making it easier to do business, possibly paving the way for a free-trade deal between two of the world's biggest markets, EU officials said on Tuesday.

Brussels and Beijing want to negotiate an accord to break down barriers to each other's markets and encourage billions of euros of new investment between the two, in a push for better ties after narrowly avoiding a trade war earlier this year.

Trade between Europe and China has doubled since 2003 and is worth more than 1 billion euros ($1.3 billion) a day, but China receives just 2 percent of the EU's investment abroad.

Diplomats told Reuters that the governments of the 28-nation EU will give the European Commission, the EU executive, the power to negotiate on an "investment agreement" on their behalf at a meeting in Luxembourg on October 18. EU Trade Commissioner Karel De Gucht added that he had the support of countries in the bloc.

"We are ready and China says it is also ready. We are waiting to get started," De Gucht told business leaders, officials and diplomats in Brussels.

With the green light from EU countries, talks could be formally launched at an EU-China leaders' summit either later this year or early in 2014 and completed in about two years, potentially unleashing billions of euros in new business.

Trade between China and the European Union rose to 435 billion euros ($580 billion) last year, making the EU China's biggest trading partner. China is the second-biggest destination for European goods after the United States.