Germany lags behind other industrialized countries and Merkel said during a visit to China she hoped the two countries would sign a memorandum of understanding in the coming months for the automobile sector, specifically on autonomous driving.
That, she said on Friday, should provide German companies with more opportunities and security in this new technology.
"Both sides must tread new paths," she said during a trip to the southern city of Shenzhen, where she was visited a Chinese start-up and a Siemens factory.
"Cooperation needs to be put on a completely new footing due to digitalization," Merkel said.
(Reporting by Andreas Rinke; Writing by Michelle Martin; Editing by Alexander Smith)