A view of an island in Nicaragua

China and Nicaragua signed a free trade agreement (FTA) on Thursday after more than a year of negotiations, demonstrating the two countries' resolve to promote free trade and investment and deepen economic integration, according to China's Ministry of Commerce (MOFCOM).

China's Commerce Minister Wang Wentao and Laureano Ortega, adviser on investment, trade and international cooperation to Nicaragua's  president, signed the FTA via video link.

The signing of the FTA is a milestone in the history of bilateral economic and trade relations, and it will unleash the potential of bilateral trade and investment and promote the quality and upgrading of bilateral cooperation, a MOFCOM official said.

It also reflects the common will and firm determination of the two countries to promote free trade and investment, sending a positive signal to the international community to support multilateralism and free trade, and promoting the stable recovery of the global economy, the official noted.

Commenting on the FTA, Wang Wenbin, a spokesperson for China's Foreign Ministry, said on Thursday that it is the most important achievement of bilateral pragmatic cooperation since diplomatic ties resumed, which will mean broader prospects for further cooperation.

China and Nicaragua resumed diplomatic relations on December 10, 2021, after the Central American country announced that it was severing "diplomatic ties" with China's Taiwan island.

It became the 181st country to establish normal diplomatic relations with China, according to a report of the Xinhua News Agency at that time.

Containing 22 chapters and 15 annexes, the China-Nicaragua FTA covers trade in goods, cross-border services, investment, rules and other fields, the MOFCOM said in a statement.

According to the agreement, more than 95 percent of traded goods will ultimately be granted zero-tariff status, with approximately 60 percent of these items receiving immediate zero-tariff treatment.

The agreement is the first of its kind signed by China with a trading partner to open up cross-border services trade, which includes financial services, and investment in the form of a negative list.

The Central American country has made a high-level opening-up commitment to China in the fields of manufacturing, construction engineering, electric power transportation, and ocean transportation, providing greater opportunities for Chinese companies to explore the Nicaraguan market. 

China will further open up to Nicaragua a wide range of areas including commercial services, environmental protection, banking and insurance, wholesale and retail, and ocean transport on the basis of its WTO commitments.

The two sides will carry out their respective domestic procedures to promote the early implementation of the FTA, the MOFCOM said.

In 2022, bilateral trade reached $760 million, with China primarily exporting textiles, computers and communication equipment, and importing agricultural products, sugar, leather and timber.

The two countries started FTA negotiations in July 2022, when they began intensive consultations and negotiations through working groups.

Zhou Zhiwei, an expert on Latin American studies at the Chinese Academy of Social Sciences, told the Global Times on Thursday that the quick conclusion of the FTA indicates that Nicaragua and the broader Central American and Caribbean regions are speeding up cooperation with the Chinese market, which is a stabilizing and driving force amid a weak world economy and growing geopolitical tensions.

"More countries in these regions have realized that enhanced trade exchanges and bilateral relations with China will bring them real benefits," Zhou noted.

Nicaragua was the fifth Latin American country to sign an FTA with China, after Chile, Peru, Costa Rica and Ecuador.

In July, China and Honduras announced the official launch of negotiations on a bilateral FTA, just three months after the two countries established diplomatic ties in March.