Foreign Minister Micheline Calmy-Rey has warned that while China's economy is booming, the country's respect for human rights still needs to be improved.
Speaking at the Swiss International Business Forum in Zurich, she said the "substantial progress" made by the Chinese government in recent years was to be welcomed.
"But there still remain big challenges, particularly regarding protection of minorities, religious freedom and freedom of expression, torture and the death penalty," she said.
At the end of a day of discussion on Thursday on the opportunities and challenges of doing business in China, Calmy-Rey said that reformers in the country were working actively for positive change in these areas.
"In the framework of our human rights dialogue, we are trying to support them," she said.
Calmy-Rey told representatives of mostly small- and medium-sized Swiss enterprises that Switzerland's Chinese partners were "very interested" in the links between economic development and human rights.
"People in China are becoming increasingly aware that the enormous economic growth has massive ecological and social consequences."
They were beginning to realise that such growth only made sense if it were accompanied by improvements in human rights, she said.
In particular, she cited the right to fair working conditions, health, education and a ban on child and forced labour.
"Improvements in these areas would lead to more stability, more cohesion and more harmony – values which are very important for the Chinese."
She said that many international and Chinese firms, as well as the Chinese government, were interested in working on these issues.
"Therefore we will continue to work on our human rights concerns in close cooperation with Swiss firms in China."
Calmy-Rey said "many books could be written" on the human rights situation in China, a country full of contrasts between the eastern regions which were rapidly developing and the underdeveloped interior of the country.
She argued that China was much more than an economic dreamland. It was a world power because of its 1.3 billion population, its strategic position and its military strength.
Any destabilisation in China would have "dramatic political and economic consequences" for the whole world.
Calmy-Rey said Switzerland had every interest in strengthening bilateral ties with China but it was unavoidable that some differences remained.
She cited China's role as a permanent member of the United Nations and its position on Sudan.
"Chinese firms have very important oil licences in Sudan. This influences Chinese behaviour in the UN Security Council.
"The Chinese position in the Security Council restricted the international community's margin of manoeuvre in the Darfur region and was not without consequences for regional stability."
Calmy-Rey also warned Swiss firms that despite the enormous opportunities of doing business in China, there were risks.
China had to provide better protection for intellectual property rights, which had become a "central problem" for the Chinese in the development of their economy.
She added that small- and medium-sized Swiss enterprises had a chance on the Chinese market because investment possibilities were being gradually eased.
But any investment in the country needed detailed and careful preparation and much patience.
swissinfo, Robert Brookes in Zurich
China is Switzerland's 12th most important trading partner in terms of imports and exports.
Swiss exports rose from SFr415 million ($316.1 million) in 1990 to SFr3 billion in 2004.
Chinese imports rose from SFr412 million in 1990 to SFr2.8 billion in 2004.