China and Switzerland signed a free trade agreement (FTA) - Beijing's first in continental Europe - in a deal that comes against a backdrop of trade tensions between the Asian giant and the European Union (EU).

Chinese Commerce Minister Gao Hucheng and Swiss Economy Minister Johann Schneider-Ammann inked the accord in a ceremony at the Commerce Ministry in Beijing before officials and reporters.

The agreement aims to build on the $26.3 billion in bilateral trade they recorded in 2012.

China in April signed its first FTA with a European country - non-EU member Iceland - but Saturday's deal marks the first with an economy in mainland Europe.

Switzerland ranked as the world's 19th-largest economy in 2012, according to the World Bank. China is the world's second-biggest.

"This free trade agreement has an important significance for the relationship between the two countries," Schneider-Ammann said after the signing ceremony.

He noted that China is the world's single biggest developing market with potential for a growing middle-class.

Switzerland and China had signed a preliminary FTA agreement in May during a visit to the landlocked European nation by Chinese Premier Li Keqiang.

Schneider-Ammann said the deal is also important for hedging risks. "We get a chance to spread out the risk of the Swiss economy a little bit over the borders of our European neighbourhood," he said.

Schneider-Ammann said doing so was vital for smaller countries like his own.

"It's absolutely important that the bigger economies find ways to keep open their markets because (the) more open the global market... the better the chances to do business," he said.

The deal still needs approval by the Swiss parliament before it can take effect.-Reuters