By Wang Zhouqiong and Cheng Guangjin in Tianjin

Premier Wen Jiabao and visiting German Chancellor Angela Merkel joined the celebration on Friday for the 100th A320 jetliner made in China as Chinese and European partners declared they will extend their contract on the Airbus assembly joint venture.

Hailed by Wen as a symbol of friendly Chinese-German ties, the assembly factory, whose contract is due to expire in 2016, will continue operating to 2026 and sell not only to domestic airlines but also international companies.

Located in Tianjin, a northern Chinese port city, the factory was founded in 2005 and its first product was completed in 2008.

Wen was present on both occasions.

He said German technicians at the factory were like teachers to the Chinese workers.

He praised their contribution to the assembly factory's success.

The relationship between China and Germany - in which common interests and joint efforts in overcoming difficulties have borne the fruit of cooperation and innovation - has set an example for the world, Wen said.

Merkel noted that China is the second-largest market for civil aircraft in the world.

The country's demand for more aircraft will benefit Germany, Airbus and its assembly factory in Tianjin, Merkel said, adding that in 2015 Airbus will purchase components worth nearly US$500 million (S$627 million) from China.

The Tianjin assembly factory is a joint venture between Airbus and a Chinese consortium comprising the Tianjin Free Trade Zone and China Aviation Industry Corporation, in which the European aircraft maker holds a 51 per cent stake and the Chinese consortium holds the rest.

Laurence Barron, president of Airbus China, said an agreement in principle was signed by Airbus, Tianjin Free Trade Zone and the Aviation Industry Corporation of China on Thursday to extend their joint venture for another 10 years.

The plant is expected to produce the A320 neo, a new engine for the A320 aircraft that is scheduled to enter service in 2015 and boasts it can deliver 15 per cent fuel savings.

"All plants will produce neo in the future," said Barron. "We will phase out the current aircraft programme when the neo is in full production."