A German government official said the aim of the trip was to deepen relations with Beijing, including "closer co-operation on the environment, energy efficiency, green technology and innovation".
After inspecting a guard of honour at a formal welcoming ceremony in Beijing's Tianmen Square on Monday, Merkel spoke warmly of the relations between the two countries.
"Our contact has been frequent and we have always carried out a very frank and constructive dialogue," she said at the Great Hall of the People before holding talks with Wen Jiabao, the Chinese premier.
"We want to make these exchanges even closer and work together increasingly in the international sphere."
Merkel's second visit to China as chancellor comes four months before world environment ministers meet in Bali, Indonesia to try to launch new talks aimed at extending the Kyoto Protocol beyond 2012.
At a June summit chaired by Merkel, G8 leaders agreed to pursue substantial but unspecified cuts in greenhouse gases and work with the UN on a new deal to fight global warming.
Kyoto obliges 35 rich nations to cut greenhouse gas emissions, but developing nations such as China – which is set to overtake the US by 2008 as the world's leading emitter of greenhouse gases – are exempted.
Later on Monday Merkel is expected to hold talks with Hu Jintao, the Chinese president, as well as Chinese cultural and civil rights groups.
Business, human rights issues in China and protection of intellectual property rights will be among the other issues on the agenda.
On Sunday, China rejected a news report that Chinese hackers linked to the military were responsible for infecting German government computers.
The German weekly Der Spiegel, which did not specify its sources, reported in its Sunday edition that German security agencies had found that computers at the chancellery and three ministries had been infected with so-called Trojans, or spy programmes, from China.
It said the country's domestic intelligence agency believed that a group of hackers associated with China's People's Liberation Army might be behind the alleged hacking.
But Jiang Yu, a spokeswoman for China's Foreign Ministry, said that Beijing "has always been against and strictly opposes the criminal action of hacking and harming computer systems", adding that "China is willing to strengthen co-operation with Germany on the issue".
German government officials refused to comment on the report.
Merkel heads to Japan on Wednesday where she will also hold talks addressing climate change as well as economic issues.