BEIJING -- German auto giant Volkswagen will build two new factories in China, moving to expand its production capacity in the country.
Investment in the plants -- one in Qingdao, Shandong Province, and the other in Tianjin -- is expected to reach a combined 2 billion euros ($2.72 billion).
The news was released Monday during German Chancellor Angela Merkel's visit to China, demonstrating the increasingly strong commingling of German political and economic strategies.
The carmaker has agreed with local partner FAW Group on the construction of the two plants. Each facility -- likely to start operating in 2017 or 2018 -- will start with a workforce of several thousand, which will increase as production picks up, and be able to produce around 500,000 vehicles annually.
Volkswagen brought a new factory online last September in Guangdong Province, an area where Japanese cars are popular. The move into Tianjin, another stronghold and home to a Toyota plant, will put further pressure on Japanese automakers in China. The other factory is slated for heavily populated Shandong Province, where the new-car market shows good growth prospects.
Chief Executive Officer Martin Winterkorn accompanied Merkel on her China visit, which started Sunday, and gave her a tour of the company's Chengdu plant. The carmaker plans to strengthen its presence in the world's largest auto market, pouring 18.2 billion euros into facilities and research and development over the next five years.
Many executives at other major German companies like Deutsche Bank, Siemens, Lufthansa and Airbus also traveled with Merkel. The chancellor sealed many large business deals and economic agreements in her meeting with Chinese Premier Li Keqiang, such as the sale of 100 Airbus helicopters.
Merkel also met with Chinese President Xi Jinping.