Chinese Investment in Europe: A Shifting Landscape
In 2025, Chinese investment in Europe surged to a seven-year high, but the story is far from straightforward. While the overall trend is positive, there are signs of a shift in priorities and a potential slowdown in greenfield investment. This article delves into the key findings of a report by the Rhodium Group and MERICS, exploring the changing dynamics of Chinese Foreign Direct Investment (FDI) in Europe.
The Rebound: A Mixed Bag
Chinese FDI in Europe reached a seven-year high of EUR 16.8 billion in 2025, a 67% increase from the previous year. This rebound was driven primarily by a surge in mergers and acquisitions (M&A) activity, which accounted for EUR 7.9 billion, or 47% of the total. The automotive sector remained the largest recipient of Chinese FDI, attracting EUR 7.6 billion, with a focus on electric vehicle (EV) supply chains. However, the report highlights a concerning trend: the value of newly announced greenfield investments declined, suggesting a potential slowdown in this area.
Shifting Destinations
Hungary, traditionally the top destination for Chinese FDI in Europe, saw its share of total investment drop from 32% in 2024 to 23% in 2025. This shift is partly due to a lack of billion-euro investment announcements in the country. Germany and France, on the other hand, saw their shares rise, with Germany attracting 15% and France 12% of total Chinese investment in Europe. The 'Big Three' economies (Germany, France, and the UK) accounted for 34% of Chinese investment in 2025, up from 23% in 2024.
The Automotive Sector: A Dominant Force
The automotive sector continued to be the largest recipient of Chinese FDI in Europe, with EUR 7.6 billion invested in 2025. This focus on the EV supply chain is particularly interesting, as it suggests a strategic shift towards clean technologies. However, the report notes that the automotive sector's importance is declining slightly in relative terms, with its share falling from 52% in 2024 to 45% in 2025.
The Decline in Greenfield Investment
While completed greenfield investments reached a new peak in 2025, the value of newly announced projects declined. In 2025, just EUR 5.2 billion in new Chinese investments in plants and equipment were announced, down from EUR 5.7 billion in 2024 and a steep drop from EUR 16.9 billion in 2023. This slowdown is concerning, as it suggests a potential shift away from greenfield investments, which are crucial for long-term growth and development.
The Role of Exports
The report also highlights the increasing importance of exports in Chinese firms' strategies. Chinese goods exports to Europe increased by 9% in 2025, with particularly strong growth in sectors that had previously attracted significant Chinese FDI. Battery exports to Europe rose by 43%, auto exports by 15% (and 29% in volume terms), and wind equipment exports surged by 65%. This trend suggests that Chinese firms are favoring exports over foreign investment, which could have significant implications for the future of Chinese FDI in Europe.
Geopolitical Uncertainty and Macroeconomic Conditions
The report identifies several factors contributing to the slowdown in Chinese FDI in Europe. Geopolitical uncertainty, particularly around tariffs, trade negotiations, and critical supply chains, has led to a wait-and-see approach among foreign investors. Additionally, macroeconomic conditions, such as a weaker Chinese currency and deflationary pressures, have made exports more attractive than investing in Europe. The report also notes that Chinese firms possess ample domestic production capacity in several sectors, reducing the need for new overseas capacity.
Europe's Scrutiny of Chinese Investments
Europe is tightening the regulatory framework for Chinese investment, which creates additional uncertainty and raises the risk of delayed or abandoned projects. The updated EU FDI screening regulation introduces several important changes, but more assertive ideas, such as giving the Commission the power to override member states' screening decisions, were not taken up due to opposition from the Council. The report also highlights intense debates in Europe about 'conditioning' investment and imposing 'made in Europe' requirements, which could have the unintended consequence of reducing the EU's overall attractiveness to Chinese firms.
The Future of Chinese FDI in Europe
In 2026, Chinese firms will continue to pursue opportunities in global markets, but the report suggests that the future of Chinese FDI in Europe is uncertain. The key question is whether Chinese firms will continue to rely heavily on exports for their overseas sales or whether we will see a steady increase in levels of outbound investment. The report concludes that if economic, political, and policy conditions do not change substantially, Chinese firms are likely to favor exports, which could have significant implications for the European economy and the global trade landscape.
