UPDATE 1-Deutsche Lufthansa signs partnership deal with Air China
* Deal signed during Merkel visit to China
* Says deal could start from October 2014
* Lufthansa shares rise 1.5 pct, outperform DAX (Writes through, adds detail)
BERLIN, July 7 (Reuters) - Germany's Lufthansa signed a partnership deal with Air China as it seeks to improve its position in China, the world's second largest aviation market, it said on Monday.
Under the deal, Air China and Lufthansa plan to set up a joint venture that will allow them to share revenue on certain routes by selling tickets for each others' flights.
Lufthansa shares rose 1.5 percent after the announcement, outperforming a 0.05 percent fall in the wider DAX index of leading German shares.
"If Lufthansa can get better access to the vast Chinese market, then it's of course a good thing for the company and that's helping the shares today," one Frankfurt-based trader said.
Lufthansa has similar agreements in place with United Airlines and Air Canada on links between Europe and North America and with ANA on routes to Japan.
Such joint ventures allow airlines to sidestep foreign ownership rules and work together on routes and pricing without falling foul of competition regulations.
Lufthansa has switched to smaller planes to reduce capacity on Asian routes after expansion by rivals such as Emirates and Turkish Airlines. It said in May that its performance there was stabilising.
The deal with Air China was signed during a visit by German chancellor Angela Merkel to China. During the trip she also oversaw the signing of a deal by Airbus to sell 100 helicopters to Chinese companies.
The Air China partnership could come into effect for the start of the winter timetable in October 2014, Lufthansa said. (Reporting by Victoria Bryan; Additional reporting by Till Weber; editing by Jason Neely)