Angela Merkel also urged Beijing to use its leverage to press the Iranian authorities to rein in their nuclear programme.
During a speech in the Chinese capital, Mrs Merkel said China, the largest buyer of Iranian oil, had a role in efforts that have seen the US and European Union both recently move to further isolate Tehran, which insists its nuclear programme is not linked to weapons production.
"If we talk about the European sanctions against Iran, the question is how China can make better use of its influence to make Iran understand that the world must not have another power with nuclear weapons," Mrs Merkel said at the Chinese Academy of Social Sciences.
The chancellor said she had previously raised the issue with the Chinese president, Hu Jintao. China has said it is against Iran developing nuclear weapons, but has also stated its opposition to sanctions.
While analysts believe western pressure is unlikely to cause China to cut the amount of Iranian oil it buys, it could make Beijing less likely to step up purchases if other countries reduce imports.
Last month the EU announced a ban the import of Iranian crude and freeze the assets in Europe of the Iranian Central Bank, while last year the US strengthened sanctions against Tehran.
A Japanese delegation yesterday was set to meet US officials in Washington to ask how much oil they can import under sanctions, and South Korean officials are also being briefed.
* With additional reporting by Reuters