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 mergers and acquisitions (M&A) activity. However, the report by Rhodium Group and MERICS reveals a complex picture, with greenfield investment slowing and a shift towards exports.
The Rise of M&A
The rebound in Chinese FDI was fueled by a surge in M&A deals, which accounted for 47% of the total. This was a significant turnaround from the previous year, where M&A activity had declined. Three large transactions in consumer goods and gaming stood out: Hongshan's acquisition of Marshall Group AB, Tencent's takeover of Easybrain, and Tencent's stake in Ubisoft's Vantage Studios. These deals highlighted the growing interest in European consumer markets and gaming.
Greenfield Investment Slowdown
While M&A activity boomed, greenfield investment, which involves building new facilities, slowed. The value of newly announced greenfield projects dropped to EUR 5.2 billion in 2025, down from EUR 16.9 billion in 2023. This decline was partly due to a shift in Chinese firms' focus towards exports, as discussed later in the report.
Sectoral Shifts
The automotive sector remained the largest recipient of Chinese FDI, attracting EUR 7.6 billion in 2025. However, its dominance was slightly reduced, with a 45% share of total investment. The entertainment sector, on the other hand, saw a 52% increase in investment, reaching EUR 2.3 billion, making it the second-largest sector. Consumer products and services also gained traction, with a 93% increase in investment.
Regional Dynamics
Hungary continued to be the top destination for Chinese FDI in Europe, attracting EUR 3.9 billion in 2025. However, its share of total investment dropped from 32% to 23%. Germany and France saw a rise in their shares, with Germany at 15% and France at 12%. The 'Big Three' economies (Germany, France, and the UK) accounted for 34% of total Chinese investment in Europe in 2025.
The Export Factor
One of the key findings of the report is the increasing reliance on exports. Chinese goods exports to Europe rose by 9% in 2025, with particularly strong growth in sectors previously targeted by FDI. Battery exports surged by 43%, auto exports by 15% (and 29% in volume), and wind equipment exports by 65%. This shift towards exports suggests that Chinese firms are prioritizing domestic production and global sales over direct investment in Europe.
Geopolitical and Macroeconomic Factors
The report delves into the geopolitical and macroeconomic conditions that influenced Chinese investment decisions. Geopolitical uncertainty and the undervaluation of the Chinese currency made investing in Europe less attractive. Additionally, sluggish growth in key sectors and regulatory pushback against EVs dampened investment prospects. Europe's scrutiny of Chinese investments and the potential for state intervention also played a role in shaping the investment landscape.
Outlook and Implications
Looking ahead, the report predicts that Chinese firms will continue to prioritize domestic industrial capacity and exports. This may lead to a decline in greenfield investment in Europe, as firms focus on domestic production and global sales. The report also highlights the challenges faced by European member states in attracting Chinese greenfield investment due to high production costs and regulatory barriers.
In conclusion, the report offers a comprehensive analysis of China's investment in Europe, revealing a shifting landscape shaped by geopolitical, macroeconomic, and sectoral factors. The future of Chinese investment in Europe remains uncertain, with exports and domestic production taking center stage.
