The agreement between the company and Chinese auto manufacturer FAW for the new factories in the world’s biggest car market was signed in the presence of Merkel and Chinese Premier Li Keqiang, Volkswagen said in a statement.
The two firms will together spend around two billion euros to expand production capacity, VW said.
It was not clear what the cost of the new factories — in the northern port city of Tianjin and Qingdao in the east — would be, or how the investment would be apportioned.
The statement also did not specify what the plants’ annual capacity would be or when they were expected to start production.
VW representatives were not able to provide further details when contacted by AFP.
“With these investments, Volkswagen is clearly expressing its commitment to the Chinese market,” Jochem Heizmann, president and chief executive officer of Volkswagen Group China, said in the statement.
The sites were selected due to their “high qualification levels and the infrastructure available”, the statement added.
Merkel is on a three-day visit to China — her seventh since 2005 — with economic ties topping the agenda and a high-powered business delegation in tow.
She toured a Volkswagen factory in the southwestern city of Chengdu on Sunday.
She is being accompanied by executives from Siemens, Airbus, Lufthansa and Deutsche Bank among other companies, according to German media.
For the EU’s biggest economy, China is a crucial mass market. Chinese companies want its technology and millions of newly prosperous citizens crave 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.
China has become Volkswagen’s largest and most important market, according to the company.
The group sold more than 1.5 million vehicles in the country in the first five months of this year, including sales by its two joint ventures FAW Volkswagen and Shanghai-Volkswagen, the statement said, up 17.7 percent from the same period in 2013.