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Daimler in $2 billion China investment with BAIC as Geely swoops

BERLIN (Reuters) - Daimler <DAIGn.DE> and its Chinese partner BAIC <1958.HK> plan to invest almost $2 billion in a state-of-the-art factory in China, underlining their relationship as rival Geely <0175.HK> makes a surprise swoop on the German carmaker.

The two will invest more than 11.9 billion yuan ($1.88 billion) in modernizing a plant to build premium Mercedes-Benz cars including electric vehicles, BAIC said in a filing to the Hong Kong Stock Exchange dated Friday and confirmed by Daimler on Sunday.

The chairman of Chinese carmaker Geely said late on Friday he had bought an almost 10 percent stake in Daimler, in a $9 billion bet to access the Mercedes-Benz owner's technology.

The move poses a challenge to Daimler, which as well as its Chinese partnership with BAIC Motor Corporation has an industrial alliance to develop cars and trucks with Renault-Nissan <RENA.PA>, which owns a 3.1 percent stake in Daimler.

Geely's Chairman Li Shufu, who quietly built up the 9.7 percent stake, is now expected to meet Daimler executives in Stuttgart on Monday, a source familiar with the matter said, and hopes to meet top German government officials in Berlin.

His approach contrasts with that of previous Chinese investors in German technology companies - such as Midea <000333.SZ>, which bought Kuka <KU2G.DE> or Weichai <000338.SZ>, which bought a large stake in Kion <KGX.DE> - who have tended to engage in lengthy consultation with stakeholders.

Berlin said it saw no need to take any action over Geely's purchase, either in terms of competition rules or of foreign investment rules.

"It is a company decision," a government spokesman said. "Due to the character of the investment as a minority stake, there is no need to act."

The government declined to comment on a report in German tabloid Bild am Sonnntag that Li would visit the German chancellery for a "secret meeting" with Angela Merkel's economic adviser on Tuesday.

Daimler also declined to comment on any possible meetings with Li.

Geely said it wants an alliance with Daimler, which is developing electric and self-driving vehicles and is the only German carmaker not to be controlled by a family, to respond to the challenge from new rivals such as Tesla <TSLA.O> and Uber.

($1 = 6.3329 Chinese yuan renminbi)

(Reporting by Andreas Rinke; Writing by Madeline Chambers and Georgina Prodhan. Editing by Jane Merriman)