The Handelsblatt reported on Wednesday that the €14 billion would be invested over the next four years – to enable Volkswagen to meet increasing Chinese demand.
Wen and Merkel will be at the VW plant in Wolfsburg, Lower Saxony on Monday to see the contract signed between VW and Chinese authorities.
The first new factory will be built in Urumqi, northwestern China, and will be capable of producing up to 50,000 cars a year, starting next year.
The factory, to be built in partnership with Shanghai Automotive (SAIC), will be the first foreign enterprise in a region that has frequently been the scene of unrest. Large numbers of minority Uigurs and Muslims live there and complain of government repression. Around 200 people died in riots there in 2009.
Last year Volkswagen sold 27 percent of its cars in China.
Wen's visit to Germany is to celebrate 40 years of official relations between the countries. “The visit will further improve communication between both sides,” a spokesman for the Chinese Foreign Ministry said.
China will also have a huge presence at the Hannover technology trade show, which Wen and Merkel will open together on Sunday.