China would "welcome" the creation of a free trade agreement with the European Union, its largest trading partner, but it could "take time" to be established, Premier Li Keqiang said on Friday.

As the two sides remain entangled in escalating trade frictions, led by the EU's probe into and punitive tariffs on China's solar panel goods, the premier called on both parties to consider establishing a regional trade arrangement.

"If China and the EU could set up a regional FTA, the impact on both sides and worldwide would be far-reaching and profound," said Li, during a meeting with delegates at the Third Global Think Tank Summit in Beijing.