China warned Singapore of "trouble" should it choose to strike a free trade deal with Taiwan, according to a conversation between the two countries' trade ministers overheard by Reuters on Saturday.

Officials in Taiwan and Singapore were not immediately available to comment on the newspaper report, which said Lee would also discuss Taiwan's possible participation in the Association of South East Asian Nations (ASEAN).

It would be the second visit to Taiwan by Lee, Singapore's former prime minister, since Taiwan President Chen Shui-bian swept to power in 2000, ending five decades of Nationalist rule.

As with his last visit, Taipei said Lee, who wields considerable influence in the region, is not an emissary and would not deliver any messages from rival China, the mass circulation newspaper quoted unidentified government sources as saying.

Lee, who has close ties to Taiwan and Chinese leaders and has visited the island and the mainland several times, hosted landmark talks between Taipei and Beijing in Singapore in 1993 which paved the way for a series of lower-level talks in Taiwan and China.

"If your country does sign an FTA (Free Trade Area) with Taiwan, you may get yourself in trouble," Chinese Minister of Foreign Trade and Economic Cooperation Shi Guangsheng told his Singaporean counterpart George Yeo via an interpreter on Saturday.

The two men were speaking together after a news conference on closer economic ties between ASEAN, China, Japan and South Korea in Brunei.

Wary of over-dependence of its economy on China, Taiwan has revived a "go south" campaign to persuade its businesses to invest in Southeast Asia. It has said it wanted to sign free trade pacts with the United States, Japan, Singapore, New Zealand and Panama.

Taiwan and China have been diplomatic and military rivals since the end of a civil war in 1949, but their economies have become increasingly intertwined as Taiwan investors have poured up to US$100 billion into China since the late 1980s.

Beijing considers Taiwan a breakaway province and has threatened to attack the democratic island of 23 million if it declares independence or drags its feet on unification talks.

China also says Taiwan is not entitled to diplomatic recognition and fiercely resists attempts by other nations to establish formal ties with the island.

A September 15 AFP report said Singapore recognises Beijing but maintains friendly relations with Taiwan, which China regards as part of its territory awaiting reunification.

Singapore has since 1975 operated three military training camps in Taiwan, whose air force and navy sent officers to the city-state in the years after its independence in 1965.

Sources said Taiwan has proposed that some 800 products are not subject to the duty-free favourable treatment under any FTA with Singapore. A majority of the items would be textiles and ready-made garments.

Taiwanese authorities fear Vietnam, Thailand and Indonesia, where labor costs are relatively low, could dump their textiles in Taiwan by taking advantage of the planned FTA with Singapore.

For this reason, products under the agreement would have to be produced in Singapore or at least 30 percent be reprocessed there, with an additional value increase of 30 percent, the sources said.

Taiwan currently levies an average 10 percent tariff on textile imports.

The Taipei government has been pushing for forging of FTA with its major trading partners for fear it could be marginalised economically while rival China is fast emerging as a "magnet" to investors.

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