China signs free trade deal with Switzerland, its first in mainland Europe

BEIJING (AFP) - China and Switzerland on Saturday signed a free trade agreement (FTA) - Beijing's first in continental Europe - in a deal that comes against a backdrop of trade tensions between the Asian giant and the European Union.

Chinese Commerce Minister Gao Hucheng and Swiss Economy Minister Johann Schneider-Ammann inked the accord in a ceremony at the Commerce Ministry in Beijing before officials and reporters. Afterwards, they clinked glasses of champagne in celebration of the agreement, which aims to increase the US$26.3 billion (S$33.8 billion) in bilateral trade they recorded last year.

China in April signed its first FTA with a European country - non-EU member Iceland - but Saturday's deal marks the first with an economy in mainland Europe.

Switzerland ranked as the world's 19th-largest economy last year, according to the World Bank. China is the world's second-biggest.

"This free trade agreement has an important significance for the relationship between the two countries," Mr Schneider-Ammann told AFP after Saturday's signing ceremony. He noted that China is the world's single-biggest developing market with potential for a growing middle-class.

Fiercely independent Switzerland is not a member of the EU and even waited decades to join the United Nations. Nonetheless, it is an economic heavyweight known for high-value luxury goods such as its world famous watches and as a financial centre.

Switzerland mainly sells watches, pharmaceuticals and chemicals, as well as machinery to China, which ships mostly textiles and machinery back to Switzerland. Unlike most western countries, Switzerland enjoys a huge trade surplus with China to the tune of US$22.8 billion last year.

Switzerland and China signed a preliminary FTA agreement in May during a visit to the landlocked European nation by Chinese Premier Li Keqiang.

Mr Schneider-Ammann said the deal is also important for hedging risks.

"We get a chance to spread out the risk of the Swiss economy a little bit over the borders of our European neighbourhood," he said. "It has a great importance."