China rejects trade and investment protectionism, premier says

China and Switzerland signed a Memorandum of Understanding at the conclusion of free trade talks on Friday during Premier Li Keqiang's visit to Bern, the Swiss capital, in what business leaders called a landmark deal.

Premier Li Keqiang joins members of the Jodelclub Saengerrunde Zurich yodeling band during his visit to a farm in the village of Embrach, near Zurich, Switzerland, on Friday. Arnd Wiegmann / Reuters

The signing of the memorandum means Switzerland will soon become the first country in continental Europe and the first of the world's top 20 economies to reach such an agreement with China.

The deal covers goods and services, environmental protection, intellectual property protection, market competition and labor protection.

Li said tariffs for agricultural products, precision instruments and industrial goods will be cut soon under the agreement.

He said he wishes to "send a powerful message to the rest of the world" through the agreement that China rejects trade and investment protectionism, and embraces trade liberalization and facilitation.

Switzerland is the first European nation Li has visited since becoming premier in March. The country can play an important role as a bridge to help boost economic ties and enhance mutual trust between China and other European countries, analysts said.

Preparatory work for negotiations on the free trade agreement between the two countries accelerated since 2010, with the deal to be concluded after nine rounds of talks.

Kurt Haerri, president of the Swiss-Chinese Chamber of Commerce, said the agreement is very significant.

The reduction of tariffs will enhance competitiveness among Swiss enterprises, especially small and medium-sized ones, which can improve their capacity for innovation, he said.

"For large Swiss companies with a considerable global market share in their industries, it will be of increasing importance to gain a certain market share in the fast-growing Chinese domestic market in order to defend their global market positions."

Switzerland's central location in Europe and its good infrastructure will also provide great opportunities for Chinese investment, he said.

"After a big wave of foreign direct investment flowing into China from large Swiss companies, many SMEs have also invested in China and now - very recently - we have seen an increasing number of Chinese companies investing in Switzerland," Haerri added.

Zhang Jian, director of the Institute of European Studies at the China Institutes of Contemporary International Relations, a top government think tank, said the free trade agreement will promote economic growth, and benefit consumption in both nations.

FTA: Pact a sign of trade liberalization

In the first quarter, Sino-Swiss trade grew 119.7 percent from a year ago. Trade value between the countries stood at $26.3 billion at the end of 2012, according to the Chinese Commerce Ministry.

China is Switzerland's biggest trade partner in Asia, and Switzerland is China's seventh-largest European trade partner.

Li pledged to expand FTA negotiations with more countries and deepen opening-up in financing, education, logistics and medical treatment services. To date, China has signed 11 free trade agreements with 19 countries and regions.

China and Switzerland also agreed to deepen cooperation in financial regulation, macroeconomic policymaking and capital market development.

They will build a dialogue mechanism in financial sectors, which can help to stabilize global financing policy, Li said.

He promised to further improve financial opening-up and accelerate market-oriented reforms in stocks, bonds and insurance.

This is "consistent with China's need for further development of its open economy", Li wrote in an article for the Zurich-based daily newspaper Neue Zürcher Zeitung, published on Thursday.

China sees Switzerland as an important friend that is closely involved in the opening-up strategy. The agreements and common views achieved during his two-day visit will be "landmark events" for the two nations, Li said.

Wang Tao, chief economist in China at financial giant UBS AG, which has a headquarters in Zurich, said China's reforms can unlock autonomous growth in the economy and provide new opportunities for international financial institutions to share the development results.

"In the near term, more action is to be expected on increasing the yuan's flexibility, and on capital account opening in China," Wang said.

Zhang Chunyan in Zurich contributed to this story.