Siemens, which led a group that helped build the 30-kilometre magnetic levitation (Maglev) train link between downtown and Pudong International Airport in Shanghai, may be among the winners of new contracts.

German Chancellor Angela Merkel (R) listens to German Transport and Construction Minister Wolfgang Tiefensee during their flight from Berlin to China's capital Beijing May 21, 2006. Merkel is on an official two-day visit to China. [Reuters]

A Siemens-led group is bidding to build a 35-billion-yuan (US$4.4 billion) Maglev link between Shanghai and the nearby city of Hangzhou, capital of Zhejiang Province.

"Germany and China have had a very good start on the Maglev project," Liu Jianchao said. "China is willing to continue to co-operate."

Merkel pledged to "develop a long-term partnership-style strategy" with Beijing when she took office on November 22; and her trip to China is only the second country outside Europe she is visiting as chancellor, following two trips to the United States.

Analysts say she faces some delicate issues with China, which she has visited in an official capacity only once before as German environment minister in 1997.

Merkel was critical of her predecessor Schroeder's efforts to scrap an EU arms embargo on Beijing that has been in place since 1989.

Also, Beijing and Berlin are at odds on imposing sanctions against Iran, with Merkel open to tougher measures and the Chinese Government against a showdown with the Islamic republic in the UN Security Council.

"From an overall perspective, Merkel will maintain policy continuity towards China, because she is aware how important the vast market means to German economy," Lian Yuru, a professor of German studies at Peking University, said in an interview.

She said Merkel is "rational, pragmatic and cautious" in handling international relations. "Her first visit as chancellor can also be to establish a personal equation with Chinese leaders."