Chinese Investment in Europe: A Shifting Landscape
In 2025, Chinese foreign direct investment (FDI) in Europe surged to a seven-year high, reaching EUR 16.8 billion. This marked a 67% increase from the previous year, driven primarily by a rebound in mergers and acquisitions (M&A) activity. However, the report by Rhodium Group and MERICS reveals a complex picture of shifting investment patterns and evolving dynamics between China and Europe.
The Rise of M&A
M&A activity played a pivotal role in the surge, accounting for EUR 7.9 billion, or 47% of total Chinese FDI in Europe. This was a significant recovery from the post-COVID lows, with three large transactions in consumer goods and gaming driving the trend. Hongshan's acquisition of Marshall Group AB, Tencent's purchases of Easybrain and a stake in Ubisoft's Vantage Studios, and Tencent's acquisition of a 25% stake in Ubisoft's Vantage Studios were notable deals.
Greenfield Investment: A Record Year
Greenfield investment also showed strong growth, reaching a new record of EUR 8.9 billion, a 51% increase from 2024. This growth was fueled by construction starts for new battery manufacturing facilities, expanding the pipeline of EV-related investments. The automotive sector remained dominant, attracting EUR 7.6 billion, with 93% of investments focused on the EV supply chain.
Shifting Destinations
While Hungary remained the top destination for Chinese FDI in Europe, its share dropped from 32% in 2024 to 23% in 2025. Germany and France saw a rise in their shares, with Germany increasing from 10% to 15% and France from 5% to 12%. 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 a key driver, attracting EUR 7.6 billion in 2025, with 93% of investments focused on the EV supply chain. However, its share of total Chinese investment in Europe declined from 52% in 2024 to 45% in 2025, reflecting a modest diversification into sectors like ICT and energy.
Slowing Greenfield Momentum
Despite the overall growth, the report highlights a slowdown in greenfield investment momentum. 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 significantly lower than the EUR 16.9 billion in 2023. This decline points to a potential shift in Chinese investment strategies.
The Export Factor
Chinese exports to Europe continued to rise, with a 9% increase in value terms in 2025. Sectors like batteries, autos, and wind equipment saw particularly strong growth, underlining the increasing threat to European industry. Chinese firms are favoring exports over foreign investment, which may be a key factor in the slowing greenfield momentum.
Geopolitical Uncertainty and Macroeconomic Conditions
Geopolitical uncertainty and macroeconomic conditions played a significant role in shaping investment patterns. The weak Chinese currency, undervalued by 16% according to the IMF, boosted export competitiveness, making the EU's trade defenses less effective. Chinese firms' ample domestic production capacity and intense competition among exporters further weakened incentives for costly investments in Europe.
Europe's Scrutiny of Chinese Investments
Europe is tightening the regulatory framework for Chinese investment, creating additional uncertainty. The updated EU FDI screening regulation introduces changes, but more assertive ideas were not taken up due to opposition from the Council. National debates on high-profile projects, such as CATL's battery factory in Spain and Tencent's acquisition of a stake in Ubisoft, reflect Europe's scrutiny of Chinese investments.
Outlook: A Complex Future
In 2026, Chinese firms will continue to pursue global opportunities, with weak domestic demand and low profit margins at home. The key question is whether they will rely heavily on exports or increase outbound investment. The report suggests that economic, political, and policy conditions will likely favor exports, with Chinese firms favoring sectors like batteries, autos, and wind equipment.
However, a few factors could offset these trends. Greenfield projects launched in past years will continue to support FDI levels, and exporters with market share may invest to cement their position. Chinese firms may also channel investments towards member states seen as more closely aligned with China, such as Hungary, Spain, and Slovakia.
In conclusion, the report highlights a complex and evolving landscape for Chinese investment in Europe. While M&A activity and greenfield investment surged in 2025, the future remains uncertain, with geopolitical uncertainty, macroeconomic conditions, and Europe's regulatory scrutiny shaping the investment environment. Chinese firms' strategies will likely be influenced by these factors, impacting the dynamics between China and Europe in the years to come.
