Merz's first official visit to China comes as Berlin and Beijing seek to build on decades-old economic ties to weather global uncertainty sparked by US President Donald Trump's tariff blitz and erratic foreign policies.

China, the world's number two economy, overtook the United States last year to become Germany's biggest trade partner. At the same time, Berlin regards the Communist Party-run state as a systemic rival to the West.

The German leader is accompanied in China by a large delegation of business leaders, including executives of auto giants Volkswagen, BMW and Mercedes.

Merz visited a Mercedes plant in Beijing on Thursday morning, where he was shown a demonstration of self-driving vehicles.

He then travelled to Hangzhou, where he is set to visit the sites of Germany's Siemens Energy and Chinese humanoid robot-maker Unitree.

The eastern city is home to several other major Chinese tech companies like AI unicorn DeepSeek and e-commerce giant Alibaba.

European business leaders, who broadly complain China is flooding the EU market with cheap goods, have urged Merz to keep a cavernous trade imbalance at the top of his agenda.

Germany's trade deficit with China hit a record 89 billion euros ($105 billion) last year.

- 'New levels' -

Following talks with Xi and top Chinese leaders in the capital on Wednesday, Merz said that China had agreed to purchase up to 120 Airbus aircraft, adding that it "demonstrates how worthwhile such trips can be".

Other contracts were in the pipeline, Merz added.

The two leaders stressed their commitment to developing closer strategic relations, with Xi telling Merz he was willing to take relations to "new levels".

Merz said he had also touched on the sensitive topic of Taiwan, the self-ruled island China claims as its territory and which it has not ruled out the use of force to annex.

Any "reunification" must be done peacefully, Merz said.

He also discussed the Ukraine war with Xi, who, according to Chinese state news agency Xinhua, said diplomacy was "key to the issue".

Merz is the latest in a string of Western leaders to court Beijing recently.

He follows Britain's Keir Starmer, France's Emmanuel Macron and Canada's Mark Carney, as they recoil from the mercurial policies of Trump, who is also expected to visit from March 31.