Venezuela said it hopes to launch the satellite into space in July 2008.

Chavez said the accord with China was of "strategic and historical importance".

There will be a technology transfer under the deal and 90 Venezuelan specialists will work on the new satellite, including 30 who will carry out special studies in China, said Vice Science and Technology Minister Nuris Orihuela.

Chavez said that Venezuelans will play an equal role in the design, manufacture and "pursuit of the project at each stage. There will be no Chinese secrets from Venezuela in this project."

He added: "There will never be sufficient words to thank China for the moral, scientific and technological support."

Chavez said the satellite would be used for government and military communications and to give remote parts of the country access to telephones and the Internet.

Oil-rich Venezuela has strengthened ties with China since Chavez took office in 1999 and launched what he calls his "Bolivarian" social revolution.

Venezuela has bought three Chinese military radars, while China is to build 10,000 homes in Venezuela. The two countries have also stepped up links in the oil industry.

State-owned Petroleos de Venezuela (PDVSA) said in August that sales of Venezuelan crude oil to China would rise from 68,000 to 300,000 barrels per day in coming years.

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