China and the European Union began talks on a landmark investment agreement Thursday, a positive move amid lingering trade tensions between the two sides.

"We have made a substantial step forward today by launching negotiations on an investment agreement, covering both investment protection and market access," said Herman Van Rompuy, President of the European Council.

"Both the EU and China believe that it is the right time to go ahead," he said at the Great Hall of the People in Beijing after a China-EU summit.

Van Rompuy said the accord would increase investment flows.

"Our bilateral investment flows are still far too low, given the level of integration taking place between our economies. This agreement will achieve more two-way investments between the EU and China."

China is the world's second largest economy and the relationship between the two, while sometimes troubled, is hugely important for world trade.

The 28-nation EU is China's largest trading partner, and China is the EU's second biggest. Trade between the two amounted to $546.0 billion in 2012, according to Chinese customs data, with China enjoying a significant surplus.

Van Rompuy was accompanied at the summit by Jose Manuel Barroso, president of the European Commission. China was represented by Premier Li Keqiang, who called the talks "friendly, candid, in-depth and broad".

He said the two sides "reached important consensus on how to further deepen China and the EU's comprehensive strategic partnership in the future".

Li added: "The meeting, it could be said, was rich in achievements."

The summit marked the 10th anniversary of what China and the EU call their "comprehensive strategic partnership".

The EU last month agreed a negotiating mandate for talks on an investment protection accord, aiming to bolster legal certainty for European firms in China and widen their access to its market.

But an investment protection accord falls well short of the extensive free trade agreements Brussels is negotiating with other major partners such as the United States.

The EU is reluctant to go that far while the Chinese government retains such a major role in the country's economy.

Beijing and Brussels have locked horns over a string of commercial issues this year, including at the World Trade Organisation. Disputes have ranged from solar panels to nuts and bolts.

The two sides reached agreement to avoid a trade war over cheap imports of Chinese solar panels, but other disputes, including on Chinese rare earth minerals, are still simmering.

Li said the two sides will "work to increase trade to $1 trillion by 2020", an apparent reference to bilateral trade and which would represent a near doubling of the current total.

On other issues, Li said the two sides discussed a "2020 strategic agenda" covering cooperation in areas including space, anti-piracy and urbanisation, while Van Rompuy said the EU brought up human rights.

"We discussed today questions related to the protection of minorities and freedom of expression, especially on defenders of human rights, and I expressed our concerns," he said.

He avoided specifics, but China has in recent years faced unrest among ethnic minorities in Tibet and the western region of Xinjiang, where over the weekend Chinese state media reported 11 people were killed in a clash.

Van Rompuy also sought out points on which to praise China, hailing it for "lifting millions of people from poverty" and welcoming "important progress" on human rights issues at a recent Communist Party meeting.

The party announced last week it was abolishing its "re-education through labour" system and easing its controversial one-child policy, and would gradually reduce the number of crimes punishable by the death penalty.