China's president is in Peru for a two-day visit ahead of the Asia Pacific Economic Co-operation forum (Apec) summit there this weekend, where leaders from 21 economies are expected to discuss possible fixes for the world economic slowdown.
The free-trade deal, which could be signed as early as March after final details are worked out, would be China's second such agreement with a resource-rich country in Latin America, whose exports it needs to fuel its ambitious growth plans.
China and Chile signed a free-trade agreement three years ago and Hu also visited Costa Rica and Cuba this week to seek further co-operation on trade in those countries.
China is the second-largest market for Peruvian exports after the US and is rapidly expanding its trade ties across the region.
Peru ships mostly copper, iron ore and zinc to the Asian giant, while China exports cell phones and machinery to Peru.