Global food giant Nestle plans to build a coffee center in southwest China's Yunnan province, according to an agreement signed on Tuesday.

According to a memorandum of understanding inked by the municipal government of Pu'er and Nestle, the Switzerland-based company will spend 100 million yuan ($15.97 million) to build a coffee farming institute, warehouses and a laboratory.

The farming institute, which will be the largest of its kind in China, will provide training to 5,000 coffee farmers, agronomists and business professionals each year, according to an online statement from Nestle.

Peng Yuanguo, vice-mayor of Pu'er, said Nestle's investment will help turn Pu'er into China's "coffee capital," buoy the confidence of local coffee producers and offset the negative effects of the sluggish global market.

"Nestle has confidence in the long-term development of Yunnan," said Heiko Schipper, managing director of Nestle's greater China food and beverage division.

Schipper said the company has been increasing its annual purchases of coffee beans in Yunnan. The province has sold 22,000 tonnes of coffee to Nestle over the past two years, Schipper said.

Pu'er is the largest coffee plantation center in Yunnan, where coffee bean output accounts for over 98 percent of the national total output. The city produced 36,500 tonnes of coffee in 2012.

Nestle began establishing coffee-related projects in Pu'er and Jinghong, another city in Yunnan, in 1988 and has established technical assistance centers in the region. In January, the company announced that it will launch a new coffee product named after Pu'er using locally produced beans.