Recession-hit Iceland today became the first European country to ink a Free Trade Agreement (FTA) with energy-hungry China, allowing the Communist giant to expand its influence in the resource-rich Arctic.
"The China-Iceland FTA is the first one between China and a European country," Chinese Premier Li Keqiang said after talks with his Iceland counterpart Johanna Sigurdardottir.
The FTA was signed in the presence of the two Prime Ministers.
It comes at the start of a five-day visit to China by Sigurdardottir as Iceland tries to repair an economy that was badly hit in 2008 by the bursting of a massive financial bubble.
Iceland exports mostly fish to China and imports Chinese products from ships to shoes and is keen to trade its services and geothermal energy resources.
Melting ice in the Arctic is opening new routes for shipping and can create a boom in extraction of minerals and oil.
Shipping through the Arctic would cut about 6,400 kilometres and two weeks off the journey between northern Europe and China.
Calling the FTA a "milestone," Li said the deal will not only commence a new era for the future-oriented, mutually-beneficial and win-win relationship between China and Iceland, but also set an example for the development of economic ties between China and Europe, as a whole.
China-Iceland bilateral trade increased by 21.1 per cent year-on-year in 2012 to USD 180 million.
China's exports to Iceland amounted to USD 953.9 million up 24.6 per cent, and its imports from Iceland stood at USD 889.6 million up 17.7 per cent, state-run Xinhua news agency reported.
