German luxury carmaker Mercedes-Benz will recall more than 127,000 vehicles in China due to a potential fire risk and steering issues, Beijing's quality watchdog said Monday.

Mercedes-Benz and one of its joint ventures in China have informed the General Administration of Quality Supervision, Inspection and Quarantine that they will recall 127,071 cars from March 13, the government agency said in a statement.

The recall includes 112,830 E-class cars made by Mercedes-Benz and China's BAIC Motor, it said.

The fire risk has been linked to a strip on the insulating panel inside the engine bay of the cars could cause a fire if it falls off and comes into contact with hot engine parts, the statement said.

An additional 14,227 imported CLS-class cars and 14 imported E-class cars will also be recalled for a similar problem, it added.

Mercedes-Benz, a unit of German car giant Daimler, could not immediately be reached for comment.

In a separate action, Mercedes-Benz China will also recall 705 imported G-class SUVs due to a steering problem, the quality watchdog said in a separate statement.

China is the world's largest auto market making it a critical destination for foreign manufacturers.