Key said the China free trade agreement had exceeded all expectations.
"It has an enviable record and showcases to the world the importance of trade liberalisation."
The announcement followed a meeting at APEC between Trade Minister Todd McClay and China's Commerce Minister Gao Hucheng.
The first round of negotiations will be held in the first half of 2017.
The terms of the negotiations will allow the improvement in areas already covered by the FTA as well as some newer areas such as competition policy and e-commerce.
There have been some strains on the relationship, including over complaints about China dumping steel in New Zealand. McClay said that issue was not touched on in the talks this weekend.