East Timor's independence leaders, Mr Xanana Gusmao and Mr Jose Ramos Horta, have told the Chinese leadership on a visit to Beijing that they hoped to establish diplomatic ties with China.
This excludes the possibility that an independent East Timor will establish ties with Taiwan, which is engaged in a diplomatic war with communist China for the support of small Pacific nations.
Mr Gusmao told the Chinese Foreign Minister, Mr Tang Jiaxuan: "East Timor places great importance on China's important role in international and regional affairs, and hopes to establish and develop normal relations with China as soon as possible."
He was quoted by the Chinese news agency Xinhua as saying East Timor would always follow the "one China" policy, a condition of diplomatic ties with Beijing. Mr Gusmao has in turn won an endorsement from China of the UN mission in East Timor preparing for eventual independence following the end of Indonesian occupation in September.
China is one of five permanent members of the UN Security Council, with the power to veto the mission. Mr Tang also announced a 50 million yuan (£4 million) aid package to help East Timor's reconstruction. China has already shown backing for the UN peacekeeping operation by sending 15 policemen to the territory.
Meanwhile, the UN government in East Timor has approved the US dollar as the official interim currency for East Timor, effectively ruling out the Portuguese escudo as its permanent legal tender. Mr Sergio Vieira de Mello, the head of the UN authority, signed the regulation on Monday, apparently with the approval of Mr Gusmao and his colleagues in the CNRT, the National Council for East Timorese Resistance, which had earlier favoured adopting the escudo because of colonial ties to Portugal.
A number of Asian economies, including Hong Kong, are pegged to the US dollar. Mr Ramos Horta said in Beijing that the US dollar was the most practical currency. The CNRT vice-president, Mr Joao Carrascalao, said in the East Timor capital Dili that East Timor still planned to adopt its own currency at the end of the UN transitional period of two to three years.
At present the Indonesian rupiah, the US dollar, the Australian dollar and the escudo are all circulating in East Timor.