Iceland's Prime Minister Johanna Sigurdardottir arrived in Beijing yesterday at the start of a five-day official visit to China.
Sigurdardottir is expected to meet with Premier Li Keqiang and sign a historic free trade agreement between the two countries.
"I am very optimistic and expect that the free trade agreement can be signed during my visit," Sigurdardottir said in a written interview with Xinhua on Friday.
She added that most of the major sticking points had been resolved by the sixth round of bilateral talks in Beijing in January.
The Chinese economy could provide multiple opportunities for Iceland's exporters and service providers, whereas prices of Chinese products to Icelandic consumers could also be lowered, she added.
"Meanwhile, China would benefit from such 'added value' from Iceland including the geothermal utilisation and research know-how, and energy efficiency in transport."
In addition to finalising the FTA, a business conference would be held by the two delegations, Xinhua said.
In 2012, bilateral trade value reached US$180 million, up 21.1 per cent year on year. Overall, China's exports to Iceland amounted to US$953 million US dollars, up 24.6 per cent, while its imports from Iceland stood at US$889 million US dollars, up 17.7 per cent.
Iceland is the first European state to recognise China's full market economy status.