Xi arrived after stops in the Netherlands and France, and was greeted in Germany's capital by President Joachim Gauck. His arrival at Gauck's residence at Bellevue Palace was met by a demonstration containing dozens of protesters against China's human rights record and Merkel touched on the issue in her comments at a joint press conference after talks later in the day.
"Broad and free expression of opinion is of course a very important element to promote the creativity of a society, be it in research, culture or civil society," she told reporters.
Both Merkel and Xi - China's first president to visit Germany in eight years - addressed the crisis in Ukraine, fresh from Thursday's United Nations General Assembly non-binding vote declaring the secession of Crimea invalid.
A regular ally of Russia, China abstained from a UN Security Council vote earlier in March on a draft resolution condemning the Kremlin-backed referendum that led to the annexation of Crimea. It also abstained in Thursday's UN General Assembly vote.
"China does not have any private interests in the Ukraine question," Xi said. "All parties involved should work for a political and diplomatic solution to the conflict."
Merkel said: "If I were Russia I would not be satisfied with the number of votes in favor of Russia."
Money talks for leaders
With Germany a key trade partner of China, talks between Merkel and Xi also centered around economic issues. The duo presided over a string of deals between companies of the two nations, including a 1 billion euro ($1.38 billion) agreement for German carmaker Daimler to expand the production of its joint venture with Beijing Automotive Group. It is the second agreement of its kind, emulating that of Daimler's rival BMW and its Chinese partner, Brilliance.
Among the other deals struck on Friday, the Bundesbank and The People's Bank of China agreed a declaration of intent to establish a yuan clearing and settlement center in Frankfurt.
Due to visit the European Union's headquarters in Belgium after his two-day visit in Germany, Xi's first European visit as president has focused heavily on foreign investment. In France, he signed off on an order with European aviation giant Airbus worth 10 billion euros. Xi's planned visit to Brussels is also seen as a move to strengthen economic ties with the 28-member bloc.
Merkel said any quickly agreed investment deal between China and the EU "could also be a precursor for a future free trade agreement."
ph/crh (Reuters, AFP, dpa)