The system, called "Beidou", will include five geostationary earth orbit satellites and 30 medium earth orbit satellites, Xinhua news agency said.

Navigation services open to commercial customers will provide users with positioning accuracy within 10 meters (33 feet), velocity accuracy within 0.2 meters per second and timing accuracy within 50 nanoseconds, the report said.

No details on the costs of the system were reported.

It was also not clear how the Chinese system would rival the American global positioning satellite system or the EU's Galileo satellite navigational system which is expected to be built with Chinese participation.

China would launch two "Compass" navigation satellites next year as part of the Beidou project, Xinhua said.

The system is expected to cover China and parts of neighbouring countries by 2008, before being expanded into a global network of satellites, it said.

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