REYKJAVIK - Visiting Chinese Premier Wen Jiabao said Saturday that cooperation between China and Iceland had great potential.

When meeting with Chinese diplomats, workers and students in Iceland, Wen said his visit was the first by a Chinese premier in 41 years.

Iceland was the first Western European country to recognize China's market economy status and to conduct Free Trade Area (FTA) negotiations with China, he said.

The prime purpose of his visit was aimed at resuming and expediting the FTA negotiations, which were officially launched in 2007, and strive for trade liberalization next year, Wen said.

Even though the trade volume between China and Iceland was currently very small, creating an FTA would have a great influence and be a good example in Europe, he said.

Secondly, his visit was aimed at enhancing bilateral investment cooperation, the Chinese premier said.

Iceland had an urgent investment demand in infrastructure construction and new energy and some Icelandic enterprises went to China to expand the market, he said, adding the two countries should push forward investment facilitation and provide a legal and structural framework for investment by both sides.

Wen said he also intended to promote bilateral cooperation in geothermal energy and polar science.

Rich in geothermal energy, Iceland had advanced expertise in its utilization and had trained a considerable number of personnel for China in recent years, he said, adding that China had abundant geothermal resources in need of development.

Polar cooperation was aimed at maintaining the peaceful, stable and sustainable development of the Arctic region, Wen said, adding the two countries could cooperate in many fields, such as the environment and security.

Wen began a two-day official visit to Iceland on Friday. He will also visit Sweden, Poland and attend a world's leading industrial expo in Germany.