China and Iceland inked a Free Trade Agreement (FTA) at the Great Hall of the People on Monday after Chinese Premier Li Keqiang held talks with his Icelandic counterpart Johanna Sigurdardottir.

"The China-Iceland FTA is the first one between China and a European country," Li said during the talks.

Li and Sigurdardottir witnessed the signing of the free trade deal after their talks at the Great Hall of the People in downtown Beijing.

At Li's invitation, Sigurdardottir arrived in Beijing on Saturday to pay a six-day official visit to China.

Calling the FTA a "milestone," Li said the deal will not only start a new era for "future-oriented, mutually-beneficial and win-win" ties between China and Iceland, but also set an example for the development of economic ties between China and Europe, as a whole.

Sigurdardottir said she believes the signing of the FTA will help to enhance the relationship between the two countries.

Hailing the contribution of Chinese investment to Iceland, Sigurdardottir said her government attaches great importance to economic ties with China and looks forward to closer cooperation with the Chinese side in various fields.

Since establishing a diplomatic relationship in 1971, China-Iceland bilateral trade and economic cooperation has progressed smoothly.

In 2012, the bilateral trade value reached 180 million U.S. dollars, up 21.1 percent year on year. China's exports to Iceland amounted to 953.9 million U.S. dollars, up 24.6 percent, and its imports from Iceland stood at 889.6 million U.S. dollars, up 17.7 percent.

After the talks, the two sides issued a joint statement on "comprehensively deepening bilateral cooperation" between the two countries.

The two sides pledged to take the signing of the free trade deal as an opportunity to further deepen mutually beneficial cooperation in the fields of trade and investment, according to the statement.

"The China-Iceland joint statement and the FTA will help to push the cooperation between the two countries onto a 'fast-track,'" said the Chinese premier.

According to the statement, China and Iceland have agreed to further enhance their exchanges and practical cooperation on Arctic, marine, geothermal, geo-scientific, environmental protection and climate change issues, among others, in accordance with relative documents signed in 2012.

"Iceland reaffirmed its support for China's application for observer status in the Arctic Council. The Chinese side expressed appreciation for this support," according to the statement.

Li and Sigurdardottir also called for openness and liberalization to facilitate world economic recovery.

"Both sides are opposed to trade and investment protectionism, and resolve to remove trade barriers through the creation of a free trade area to contribute to the harmonious development of world trade," said the statement.

During the talks, the two sides agreed to strengthen political and economic dialogues on the basis of mutual respect and equality.

As United Nations member states, the two sides have pledged to stand for respecting the purposes and principles of the Charter of the UN and the authority and role of the UN.

"The leaders of the two sides reiterated their support for a fair, just, reasonable and rule-based multilateral system, with the United Nations playing the central role in addressing global issues," according to the statement.

It said the two sides believe that all countries should be treated as equals in the international community and be able to play a constructive role in world affairs, regardless of size or strength. "The two sides share common interests in working together on bilateral, multilateral and global issues."

During the talks,the two sides also reaffirmed that they fully respect each other's sovereignty and territorial integrity. "Iceland firmly adheres to the one-China policy and supports the peaceful development of cross-Strait relations and the course of the peaceful reunification of China."

During the talks, the two sides also expressed their commitment to the pursuit of sustainable development, taking into account the political, economic, social, environmental and cultural circumstances of each country.

"The two sides respect each other's development paths chosen in line with their own national circumstances," according to the statement.

In the statement, the two sides also reiterated that they follow the ideals embodied in the Universal Declaration of Human Rights and relevant international human rights treaties they have acceded to and will continue to actively promote and protect human rights.

The two sides also agreed to expand cooperation on labor issues, as well as in culture, education, tourism and other fields, and facilitate people-to-people contacts and exchanges, according to the joint statement.