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 marks a 67% increase from the previous year and a significant rebound from the COVID-era lows. But what does this trend tell us about the evolving relationship between China and Europe, and where might it be headed?
The Rebound: M&A and Greenfield Investment
The surge in Chinese FDI can be attributed to a strong recovery in mergers and acquisitions (M&A) activity, which accounted for EUR 7.9 billion of the total. This is a welcome development, as M&A has been a key driver of the rebound in global Chinese FDI since 2024. However, greenfield investment, which involves building new facilities, remained the primary channel for Chinese FDI in Europe, increasing by 51% to EUR 8.9 billion.
The Top Destinations: Hungary, Germany, and France
Hungary continued to be the top destination for Chinese FDI in Europe, attracting EUR 3.9 billion in 2025. However, its share of total Chinese investment in Europe dropped from 32% in 2024 to 23% in 2025. This decline can be attributed to a lack of billion-euro investment announcements in 2025, with smaller projects dominating.
Germany and France, on the other hand, saw their shares of Chinese investment rise. Germany's share increased from 10% in 2024 to 15% in 2025, while France's share rose from 5% to 12%. Completed investments in Germany nearly tripled to EUR 2.5 billion, while they nearly quadrupled in France to EUR 1.9 billion.
The Dominance of the Automotive Sector
The automotive sector continued to be the largest recipient of Chinese FDI in Europe, attracting EUR 7.6 billion in 2025. This is a significant increase from EUR 5.2 billion in 2024, and it marks the second strongest year on record for Chinese automotive investment in Europe.
However, the share of Chinese investment in the automotive sector declined from 52% in 2024 to 45% in 2025, as the sector diversified into other areas such as ICT and energy. The EV supply chain continued to dominate Chinese automotive FDI, with 93% of investments focused on this sector.
The Slowdown in Greenfield Investment
Despite the strong growth in Chinese FDI in Europe, the value of newly announced greenfield investments in 2025 fell back below announced M&A activity, reversing a three-year trend. This slowdown is notable, as continued headwinds in China's domestic economy would typically incentivize firms to expand into higher-margin overseas markets.
The Role of Exports
One factor contributing to the slowdown in greenfield investment is the preference for exports over foreign investment. Chinese exports to Europe continue to rise, with particularly strong growth in sectors that had previously attracted significant Chinese FDI. Battery exports to Europe increased by 43%, while auto exports rose by 15% in value and 29% in volume, and wind equipment exports surged by 65%.
Geopolitical Uncertainty and Macroeconomic Conditions
Geopolitical uncertainty and macroeconomic conditions also play a role in the shifting landscape of Chinese investment in Europe. The uncertainty around tariffs, trade negotiations, critical supply chains, and major power tensions contributed to subdued investment. Additionally, China's currency weakened throughout the year, making exports more competitive and overseas investment more expensive.
Europe's Scrutiny of Chinese Investments
Europe is also tightening the regulatory framework for Chinese investment, creating additional uncertainty and raising the risk that projects are delayed or abandoned. 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 Outlook for 2026
In 2026, Chinese firms will continue to pursue opportunities in global markets against a backdrop of weak domestic demand and low profit margins at home. 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.
Overall, the shifting landscape of Chinese investment in Europe reflects the complex interplay of economic, political, and policy factors. As Europe continues to scrutinize Chinese investments, the future of this relationship remains uncertain, but one thing is clear: the era of easy investment is over.
