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's driving this surge, and what does it mean for the future of Chinese-European economic relations?
The Rebound: M&A and Greenfield Investment
The report highlights that the rebound in Chinese FDI is primarily driven by a surge in mergers and acquisitions (M&A) activity. Chinese firms invested EUR 7.9 billion in M&A deals in Europe, a 89% increase from the previous year. This is a stark contrast to the seven straight years of decline in M&A activity prior to 2024. The report attributes this to Chinese firms' rising competitiveness in higher value-added sectors, which is supporting greenfield expansion.
Greenfield investment also showed strong growth, reaching a new record of EUR 8.9 billion. This is a 51% increase from 2024 and a testament to the continued interest in expanding production capacity in Europe. The automotive sector remained the largest recipient of Chinese FDI, with EUR 7.6 billion invested in 2025, a 46% increase from the previous year.
Shifting Destinations: Hungary, Germany, and France
While Hungary remains the top destination for Chinese FDI in Europe, its share has fallen from 32% in 2024 to 23% in 2025. This is due to a decline in billion-euro investment announcements in the country. Germany and France, on the other hand, have seen their shares rise, with Germany's share increasing from 10% to 15% and France's share rising from 5% to 12%.
The report attributes this shift to the increasing importance of Germany and France in the Chinese investment landscape. Germany's share of total Chinese FDI in Europe rose to 15%, while France's share increased to 12%. This is a significant change from the previous year, when Germany accounted for 10% and France accounted for 5%.
The Automotive Sector: Dominance and Diversification
The automotive sector remains the largest recipient of Chinese FDI in Europe, with EUR 7.6 billion invested in 2025. However, the report notes that the sector's dominance has declined slightly, with its share falling from 52% in 2024 to 45% in 2025. This is due to a modest diversification into sectors such as ICT and energy, including new investments by TikTok and the State Development and Investment Corporation (SDIC).
The report also highlights the increasing importance of the EV supply chain in Chinese FDI. Investments in the sector totaled EUR 7.6 billion, with 93% focused on the EV supply chain. This is a significant increase from the previous year, when the sector accounted for 52% of Chinese investment in Europe.
The Future: Export-led Growth and Geopolitical Uncertainty
The report concludes that Chinese firms are favoring exports over foreign investment, which is likely to continue in the future. This is due to a combination of factors, including geopolitical uncertainty, macroeconomic conditions, and sluggish growth in key sectors. The report notes that Chinese firms are increasingly focusing on building domestic industrial capacity and keeping core technologies and know-how at home.
In Europe, high production costs and regulatory barriers will make it challenging for member states to attract Chinese greenfield investment. The report suggests that Chinese firms may continue to channel investments towards member states that are seen to be more closely aligned with China, such as Hungary, Spain, and Slovakia. However, the report also notes that there are a few things that could offset these trends, including the continued growth of Chinese acquisitions in late 2025 and the potential for Chinese firms to position themselves for the European preference rules laid out in the IAA.
In conclusion, the report highlights the shifting landscape of Chinese investment in Europe, with a surge in FDI driven by M&A activity and a continued focus on the automotive sector. However, the report also notes the challenges and uncertainties facing Chinese firms in Europe, including geopolitical uncertainty, macroeconomic conditions, and regulatory barriers. The future of Chinese-European economic relations remains uncertain, but the report suggests that Chinese firms will continue to pursue opportunities in global markets, with a focus on exports and domestic industrial capacity.
