Rising Chinese investment in Europe -- hit by a sovereign debt crisis -- has raised concerns on the continent, although Chinese Premier Wen Jiabao earlier this year sought to allay fears, saying Beijing did not intend to "buy Europe".

Iceland last year denied a request by Huang Nubo -- founder of property firm Zhongkun Group -- to buy 300 square kilometres (200 square miles) of land in Iceland for a tourist resort and to create Europe's biggest nature reserve.

But Yao Chen, a spokeswoman for the company, said Tuesday it had been notified that "the Icelandic government has approved a new proposal to develop the resort on a land lease", according to the official Xinhua news agency.

"But as the negotiation for a contract is still on, no more details are available at this moment."

Yao said the firm welcomed the decision and was working to secure a long-term lease, "hopefully one good for 99 years, for the core part of the same patch of land" it originally intended to buy, the report said.

Last week, a committee representing Iceland's ministries of economy, finance and industry recommended the government approve a deal to allow Huang to lease land in the area, two weeks after a visit to the country by Wen.

But industry ministry spokesman Thorir Hrafnsson told AFP the committee had recommended the government only lease two to three square kilometres of land -- far less than what Huang originally intended to buy.

Huang, whose property firm owns resorts and tourist facilities across China and the world, had last year offered to buy the area known as Grimsstadir a Fjoellum for about $10 million and had wanted to invest about $200 million.