Chinese premier Wen Jiabao’s visit with German chancellor Angela Merkel to the Volkswagen plant in Wolfsburg saw a deal inked with Chinese partner SAIC Motor  Corporation to build a new plant in Urumqi, western China and agreement with VW ‘s other Chinese partner, First Automobile Group (FAW ), to extend their JV 25 more years.

VW and SAIC will build a vehicle manufacturing plant in Urumqi, the capital of Xinjiang province costing about EUR170m. From 2015 this plant will produce up to 50,000 vehicles per year. VW will lure suppliers to the region and will set up its own training centre.

The FAW-VW joint venture was set up in 1991 and now operates vehicle and component plants in Changchun, Chengdu and Dalian.

Volkswagen sold 2.26m vehicles in China in 2011, with deliveries increasing 15.6% to over 633,000 units in the first three months of this year. The two joint ventures Shanghai-Volkswagen and FAW-Volkswagen with a total workforce of some 50,000 produce vehicles, gearboxes, chassis and engines at 10 plants.