China, Germany in auto, aircraft deals as Merkel visits

BEIJING (AFP) - China and Germany signed a string of trade and investment deals on Monday during a visit by Chancellor Angela Merkel, including two new Volkswagen factories and the sale of 123 Airbus helicopters.

The two countries are both exporting giants - with Germany the EU's biggest economy and China the world's second-largest - and Merkel was looking to strengthen their economic relationship on her three-day visit, her seventh since coming into power in 2005.

She was accompanied by executives from Siemens, Airbus, Lufthansa and Deutsche Bank among other companies, according to German media.

Merkel and Chinese Premier Li Keqiang oversaw the signing of a series of agreements on Monday.

According to a statement by Volkswagen, the German carmaker will build two new vehicle plants in the northern port city of Tianjin and Qingdao in the east as it invests two billion euros (S$3.4 billion) along with Chinese auto manufacturer FAW.

The new plants' production capacity will be finalised "based on market demand and relevant industrial policies", the company said in an email to AFP.

Merkel toured a Volkswagen factory in the southwestern city of Chengdu on Sunday.

China has become Volkswagen's largest and most important market, the company said, adding the group sold more than 1.5 million vehicles in the country in the first five months of this year, including sales by its joint ventures FAW Volkswagen and Shanghai-Volkswagen, up 17.7 per cent on year.

European aerospace giant Airbus announced that its helicopter division has signed contracts to sell "a record" 123 aircraft over up to six years to three Chinese companies.

The helicopters - mainly light single-engine aircraft from the Ecureuil family and the light twin-engine EC135 - will be used for general aviation activities, it said in a statement.

No financial details were provided.

"It is evident that China's relaxation of its low-altitude airspace regulations is enabling the country's burgeoning helicopter market to realise its potential," Airbus Helicopters CEO Guillaume Faury said in the statement.

Also on Monday, German airline group Lufthansa said that it had signed a memorandum of understanding to form a joint venture with Air China.

The new partnership, which will come into force in October, will provide passengers with additional travel options and flight connections and allow Lufthansa "to have even better access to the second largest aviation market after the US", according to the German carrier.

China is a crucial mass market for Germany, with Chinese companies wanting its technology and millions of newly prosperous citizens craving German goods ranging from Audi sedans to luxury home appliances.

Germany last year sold goods worth 67 billion euros to China, its number-two export market outside Europe after the United States. Imports from the Asian powerhouse, meanwhile, topped 73 billion euros.

Merkel angered Beijing in 2007 by meeting Tibet's exiled spiritual leader, the Dalai Lama, whom ruling Communist Party leaders consider a dangerous separatist.

But during the latest visit, any discussion of human rights is likely to take place behind closed doors, an approach that German officials have argued can be more effective in China than finger-wagging reprimands.