Sino-Icelandic Economic and Trade Relationship
2019/04/10

Iceland is the first European country which recognized China's market economy status and also the first European country which signed Free Trade Agreement(hereinafter referred to as FTA) with China. In recent years, China-Iceland economic and trade relations have become closer and stronger with improved cooperation mechanism, strengthened cooperation platforms and expanded fields. Major features are as followed:

Firstly, the cooperation mechanism has been constantly improved. In 1995, China-Iceland Joint Trade and Economic Committee was established, 12 session meetings of the Committee have been held so far. In May 2005, China and Iceland signed the Memorandum of Understanding (hereinafter referred to as MOU) on Strengthening China-Icelandic Economic and Trade Cooperation. Then Iceland took the lead in recognizing China's market economy status among European countries and the two sides decided to launch a feasibility study on the establishment of the China-Icelandic Free Trade Area. In November 2005, China and Iceland signed the MOU on Cooperation among the China Council for the Promotion of International Trade (CCPIT) , the Icelandic Trade Commission and Iceland China Trade Council. In December 2006, the two sides signed a protocol on the initiation of negotiations on China-Iceland FTA. In June 2010, the People's Bank of China and the Central Bank of Iceland formally signed a bilateral currency swap agreement with totaling 3.5 billion Yuan RMB (66 billion Icelandic Krona), which was renewed twice respectively in June 2013 and December 2016. In April 2013, China and Iceland signed the FTA, which is the first one signed by China and an European country, entering into effect officially on July 1, 2014. Up to now, the Joint Committee of China-Iceland FTA has held three working group meetings. In June 2015, the General Administration of Quality Supervision, Inspection and Quarantine of China (AQSIQ) signed the MOU on Food Safety for Import and Export between China and Iceland with the Ministry of Fisheries and Agriculture of Iceland (MFAI)and the MOU on Information Exchange on Import and Export Commodities between China and Iceland with the Interior Ministry of Iceland respectively. In June 2016, AQSIQ and MFAI comprehensively exchanged views on the establishment of cooperation mechanism on animal and plant inspection and food safety ( SPS) and strengthening of quality inspection cooperation under the framework of China-Iceland FTA, and had a discussion on the requirements for inspection and Quarantine of Icelandic aquatic products and animal husbandry products to be exported to China, and some related cooperation documents were also signed. In September 2018, MOU on China-Iceland Electronic Commerce Cooperation between the Ministry of Commerce of China (MOFCOM)and the Ministry for Foreign Affairs of Iceland(MFA), MOU on Jointly Establishing a Geothermal Working Group between MOFCOM and MFAET were signed respectively. In October of 2018, the First Meeting of China-Iceland Working Group on Electronic Commerce was held successfully in Iceland.

Secondly, bilateral trade in goods has steadily increased. According to Icelandic statistics, since the implementation of China Iceland FTA, the volume of bilateral trade in goods has increased from $401 million in 2014 to $712 million in 2018, with an average annual growth of 20.64%. In 2018, bilateral trade in goods exceeded $700 million for the first time, among which, Icelandic exports to China amounted to $136 million, an increase of 40.2% over the same period last year, and imports from China totaled $576 million, an increase of 28.6% over the same period last year. According to Chinese statistics, bilateral trade in goods between China and Iceland reached $420 million in 2018, an increase of 90.4% over the same period last year; China imported $166 million worth of commodities from Iceland, an increase of 50.58% over the same period last year; and China exported $254 million worth of goods to Iceland, an increase of 130.05% over the same period last year. China continues to maintain its position as Iceland's largest trading partner in goods in Asia and the seventh largest trading partner in the world. Among China's main exports to Iceland are automotive parts, pneumatic rubber tires, automatic data processing equipment and its components, bicycles, static converters, furniture and its components, textile yarn fabrics and products. Among China's main imports from Iceland are seafood, unformed aluminum and aluminum materials, medical devices, cosmetics and skin care products.

Thirdly, the growth rate of trade in services is also remarkable. According to Icelandic statistics, from 2014 to 2018, the number of Chinese visitors (including Hong Kong, Macao and Taiwan Districts) to Iceland increased from 26,000 to 135,500, with an average annual growth rate of 72.52%, among them, 89,550 from mainland of China. In 2017, bilateral trade volume in services amounted to $108.418 million, an increase of 11.19% over the same period last year. Among them, exports volume amounted to $90.764 million, an increase of 18.57% over the same period last year, while imports amounted to $17.654 million, a decrease of 15.79%.

Fourthly, the results of two-way investment cooperation are highlighted. In recent years, China-Iceland investment cooperation has developed steadily, and remarkable achievements have been achieved in geothermal development and utilization, oil and gas exploration, telecommunications, shipping, shipbuilding, medicine, energy conservation and environmental protection etc. By the end of 2018, China had approved 33 Icelandic investment projects in China, with an actual utilization of foreign capital of $136.1 million; China invested one project in Iceland, with an investment of $14.5 million; and Chinese enterprises contracted a total of $60.12 million in Iceland; China has introduced four projects of technology and equipment from Iceland, with a total amount of US$7.45 million.

At present, Icelandic Group PLC, one of the largest fishery companies in Iceland, and HB. Grandi, ORKA, Eimskip, Ossur, ALVOTECH, Actavis and Marel, have their branches or subsidiary companies in China. Icelandbanki, Iceland's third largest bank, large supermarket chain Byko, food company Bakavo, cosmetics company Bioeffect, CCP game software company and more than 20 other companies also have their offices in China. In July 2007, Eimskip Group and Qingdao Port Group signed the largest cold storage cooperation project in China, with a contract value of $195 million. During the exchange of visits between the two Prime Ministers in 2012 and 2013, China and Iceland signed a series of trade agreements, mainly covering geothermal, ferrosilicon, trade and investment. In July 2015, China Nonferrous Metals Group signed an agreement with Iceland Kleipir Company to formally launch a feasibility study on the construction of an aluminum plant in Northern Iceland. In the same month, Geely Group of China invested US$14.5 million in Carbon Cycle International Corporation of Iceland which represents a breakthrough in China's direct investment in Iceland.

Looking forward to the future, China and Iceland have great cooperation space and potentials in many fields with bright prospect, such as trade, tourism, aviation, maritime transport, innovation and originality industry, high and new technology, data center construction, e-commerce, clean energy and environmental protection, as well as airports, ports, highways, tunnels and other infrastructure projects.