Singapore, Nov 14 (IANS): The leaders of the Association of Southeast Asian Nations (Asean) and Chinese Prime Minister Li Keqiang on Wednesday discussed a proposed code of conduct for trade through the South China Sea.

The code of conduct, whose first draft is expected be ready by next year before coming into effect in 2021, will serve to iron out differences over trade and territorial disputes between China and the 10-nation regional bloc, Efe news reported.

During talks at the annual Asean summit in Singapore, the bloc leaders and Li Keqiang discussed negotiating the code to promote peace and stability in the disputed South China Sea -- one of the busiest waterways in the world.

China and some Asean members have competing territorial claims to islands in the South China Sea.

Li said the code would also help in improving trade ties between the regional bloc and China.

Philippines President Rodrigo Duterte said he supported the plan, adding that laying down a code of conduct was necessary.

Asean and China also discussed upgrading their Free Trade Area pact which was signed in Phnom Penh in 2002 and came into effect in 2010.

The pact aimed to create free trade zones between the China and Asean -- comprising of Malaysia, Indonesia, Brunei, Vietnam, Cambodia, Laos, Myanmar, Singapore, Thailand and the Philippines.

Territorial contentions are one of the major reasons for tensions in Southeast Asia, especially after Beijing began its infrastructure construction and military bases on several disputed islets and reefs.

China is embroiled in a dispute over the Scarborough Shoal with the Philippines, and over the Spratly islands with Brunei, Malaysia, Taiwan and Vietnam.