China–Iceland relations formally began on 8 December 1971, when Iceland recognised Beijing. Prior to the signing of a Free Trade Agreement between the two countries in 2013, diplomatic activities between them were relatively few in number. However, since this event, political cooperation has increased. There is growing number of economic and cultural ties, as their political partnership has expanded.
In addition, Iceland is helping to develop China's renewable energy sector; specifically, in the field of geothermal power.
History In May 1972, China assigned the first resident ambassador to Iceland.
In 1995, Iceland set up its embassy in Beijing and assigned its first resident ambassador to China.Economic and Commercial Office of the Embassy of the People's Republic of China in the Republic of Iceland. (2004). Bilateral Relations. Retrieved from http://is2.mofcom.gov.cn/article/bilateralcooperation/inbrief/200411/20041100003919.shtml
In December 1995, China resumed the practice of sending resident ambassadors to Iceland (between 1983 and 1995, the Chinese ambassador to Copenhagen, Denmark, was also accredited to Iceland).
In 2005, Iceland was the first country to recognise China as a developed market economy.
In 2010, Enex, an Icelandic firm, signed an agreement on digging for geothermal energy in Inner Mongolia and Shaanxi, China.
In 2011, Chinese tycoon Huang Nubo offered to buy Grímsstaðir in North-East Iceland. The deal fell through.
In 2013, Iceland signed a Free Trade Agreement with China.
Economic relations
The Free Trade Agreement (FTA) On the 15 April 2013, Iceland and China signed a Free Trade Agreement.Government of Iceland. (2013). FREE TRADE AGREEMENT BETWEEN ICELAND AND CHINA. Retrieved from https://www.government.is/media/utanrikisraduneyti-media/media/fta-kina/China_fact_sheet_enska_15042013_Final.pdf The agreement was signed by the Minister for Foreign Affairs and External Trade of Iceland, Mr. Össur Skarphéðinsson, and Mr. Gao Hucheng, Minister of Commerce of the People’s Republic of China. The negotiations began in 2007 and spanned until 2013. The agreement eventuated after four rounds of talks during 2007–2008, and two rounds in December 2012 and January 2013.
The FTA was China's first with a member state of the European Economic Area.Jónsson, O.D., Hannibalsson, I., & Yang, L. (2013). A bilateral free trade agreement between China and Iceland. In Institute of Social Science (Eds.), Þjóðarspegil's Abstract Book XIV (pp. 13 – 20). Reykjavík: University of Iceland.Steinveg, B. (2021). The role of conferences within Arctic governance. Polar Geography, 44(1), 37-54. It covers trade in goods and services, rules of origin, trade facilitation, intellectual property rights, institutional provisions, dispute settlement, competition and investment.Ministry of Foreign Affairs. (2013). Fact Sheet on Iceland-China Free Trade Agreement. Retrieved from https://www.government.is/media/utanrikisraduneyti-media/media/fta-kina/China_fact_sheet_enska_15042013_Final.pdf
The FTA removed all tariffs on industrial products from China. This accounted for 99% of Chinese exports to Iceland at the time of signing. In addition, tariffs on 7830 tariff lines of Icelandic imports were removed. This accounted for 82% of Icelandic exports to China at the time of signing.
The tariffs on a small class of exports to China will be removed following a transitional period of 5 to 10 years.
Economic relations prior to agreement Trade between Iceland and China prior to the FTA was small in scale. In 2011, less than 1% of Iceland's total export went to China, and more than 7% of Iceland's imports came from China. The trade balance was in favour of China. From 1999 to 2011, exports from Iceland to China grew by 1.400%, while Icelandic imports from China grew by 1.000%. The majority of trade between the two nations consisted of seafood products, as it accounted for 94.3% of Icelandic exports to China between 2009 and 2011.
Trade was progressively increasing. During the period of 2011 to 2012, Icelandic exports to China increased by 41%, reaching US$61.2 million. In the same time period, Icelandic imports from China increased by 84%, reaching US$340.8 million. In 2012, China ranked fourth in imports into Iceland and was its largest trading partner in Asia. In addition, China ranked nineteenth in Iceland's export market.
Cultural relations Tourism
Chinese tourism to Iceland is a nascent, but growing sector. In 2006, Chinese tourists accounted for 1.1% of Iceland's total international visitors. There were an estimated 10,000 Chinese tourists to the country that year. Tourism numbers began to noticeably rise in 2015, as 47,643 Chinese people visited Iceland.Icelandic Tourism Board. (2020). Ferðamálastofa - Icelandic Tourist Board:Around 200 million Tourists in 2019. Retrieved from https://www.ferdamalastofa.is/is/umferdamalastofu/frettir/category/1/taeplega-2-milljonir-farthega-2019Yingying, X. (2020). Chinese tourists in Iceland: Motivation and satisfaction (Unpublished master's thesis). University of Iceland, Reykjavik. The following year this number increased by 40%, and in 2017 it increased by 80%. By 2019, a little less than 100,000 Chinese tourists visited Iceland. That is 10 times more than the number that visited in 2006. Chinese tourists made up 5% of Iceland's total international visitors for that year.
Þórhallsdóttir and Ólafsson have theorised this rapid growth in tourism was due to recent events where Iceland received significant media attention. The first of which occurred in 2008, as Iceland economic collapse devaluated its currency making it a less expensive place to travel. The second event was the eruption of Eyjafjallajökull in 2010. Delays and cancellations of flights all over the world, boosted Iceland's international profile. In addition, in the wake of the eruption, the government launch a tourism campaign called Inspired by Iceland. The campaign was run by Promote Iceland and aimed to assure people that Iceland was still a safe place to travel.
Education On 13 May 2019, an agreement of mutual recognition of higher education between Iceland and China was signed. The agreement was signed by Lilja Alfreðsdóttir, minister of education and culture in Iceland, and Chen Baosheng, Minister of Education of China. The aim of the agreement was to facilitate student exchanges and strengthen language education. Prior to the agreement, about 30 Icelanders studied abroad in China, and more than 30 Chinese students studied in Iceland every year. The agreement intends to increase access and flow between international universities, as the University of Iceland has entered into exchange program agreements with 15 universities in China.
The University of Iceland has a School of Asian Studies, in which Chinese language courses are offered. In addition, since 2006, the Beijing International Studies University has offered Icelandic language courses.Peking University. (2021). School of Foreign Languages. Retrieved from http://www.isd.pku.edu.cn/info/1457/2612.htm
Science In October 2018, the China Iceland Arctic Research Observatory was officially opened. It is a joint project between Aurora Observatory (AO), an Icelandic non-profit foundation, and the Polar Research Institute of China (PRIC). It is located in Kárhóll. Initially, it was intended to be used for aurora and upper atmosphere research. Now, it is also being used to research satellite remote sensing.
China Iceland Cultural Fund In 2010, Huang Nubo founded the China Iceland Cultural Fund.Loftsdóttir, K. (2014). “The Enemy Outside and Within: The Crisis and Imagining the Global in Iceland. In K. Loftsdóttir & L. Jensen (Eds.), Crisis in the Nordic Nations and Beyond: At the Intersection of Environment, Finance and Multiculturalism (pp. 161-181). New York: Routledge.Taylor, M. (2014). Speed Limits: Where Time Went and Why We Have So Little Left. London: Yale University Press. The foundation was based in China. Huang was the chairman of the board that consisted of the Icelandic ambassador to China, Kristín A. Árnadóttir, and the director of Beijing University's Poetry Center, Professor Xie Mian. The purpose of the foundation was to support cultural collaborations between the two countries, with particular emphasis on the field of literature. It was intended to operate for 10 years. During this time, Huang guaranteed to contribute US$1 million to the fund. The fund was responsible for hosting several Chinese-Icelandic poetry festivals. These festivals were held in both Iceland and China.
Geopolitical strategy
Embassies In 1995, Iceland opened an embassy in Beijing. This was Iceland's first diplomatic mission in Asia. It is serves as a key base for their diplomatic relations in Asia, as Mongolia, North Korea, South Korea, Cambodia, Laos, Thailand and Vietnam are also all under the jurisdiction of this embassy.
China have an embassy in Iceland. It is four storeys tall, and can hold approximately 500 personnel. There are officially 5 Chinese diplomats accredited to Iceland.
2008 financial crisis In December 2008, during the 2008 financial crisis, Chinese fireworks providers agreed to defer payment for their annual shipment to Reykjavik.Sigtryggsson, E. (2008, October 22). Kaupa minna magn flugelda ("Buy fewer fireworks"). Morgunbladid. This reflected favourably on China, as gamlárskvöld (New Year's Eve) celebrations were able to proceed as scheduled.
China helped Iceland recover from its economic collapse in 2008.Sakhuja, V. (2011). China's Arctic Calculus and Iceland. SSPC Issue Brief, (3), 3 – 8. https://www.sspconline.org/sites/default/files/IssueBrief3.pdf Icelandic president, Ólafur Ragnar Grímsson, remarked about geo-political relations towards Iceland during this time, “China and India lent a helping hand to Iceland in many constructive ways, while Europe was unfriendly and the U.S. was absent”.
On June 9, 2010, the Central Bank of Iceland and the People's Bank of China signed a three-year bilateral currency swap agreement. This amounted to over US$480 million. This currency swap was renewed again in 2013 and 2016.
Memorandum of understanding In 2012, Iceland was the first stop on Premier Wen Jiabao diplomatic tour of Europe. On 20 April 2012, during his visit, prime minister, Jóhanna Sigurðardóttir, and Premier Jiabao presided over the signing of a memorandum of understanding (MoU) between the two countries. It consisted of the following business and bilateral agreements:
Framework agreement on Arctic cooperation MoU between the Chinese Ministry of Land Resources on Geothermal and Geosciences Cooperation and the Icelandic Foreign Ministry Letter of intent between the Government of Iceland and China National Blue Star Group on two projects in Iceland Framework agreement between China Petrochemical and Orka Energy Ltd Sinopec agreed to join the Expansion of Geothermal Development Scope and Cooperation MoU between Promote Iceland and China Development Bank on planning consultancy cooperation
The Belt and Road Initiative On 2 February 2018, Jin Zhijian, the Chinese ambassador to Iceland, encouraged Iceland to join the Belt and Road Initiative.Zhijian, J. (2018). Remarks by H.E. Ambassador JIN Zhijian at the Reception Upon Assuming the Post and Celebrations of Chinese New Year. Retrieved from http://is.china-embassy.org/eng/zbgx/rwjl/t1536495.htm