The unexpected rise in Chinese investment in Europe

Jorge Costa Oliveira

A recent report by the Rhodium Group and MERICS states that, for the first time since 2016, Chinese outbound foreign direct investment (OFDI) in the EU and the UK reached €10 billion in 2024 – a 47% increase from the previous year. Moreover, Europe remained the leading destination for Chinese investment in high-income economies, drawing 53.2% of all Chinese OFDI in those markets.

In 2024, the EU and UK’s share of total Chinese OFDI also rose to 19.1% – the first notable increase since 2018 – even though the vast majority of Chinese OFDI still flows into low- and middle-income economies, particularly to Southeast Asia.

This growth was driven both by record levels of greenfield investments and a stronger mergers and acquisitions (M&A) landscape. Greenfield investment grew for the third consecutive year, rising 21% year-on-year to a record €5.9 billion, remaining the dominant form of Chinese investment in Europe. M&A activity also improved significantly – up 114% year-on-year to €4.1 billion.

Central and Eastern Europe attracted more than half of all Chinese OFDI in the region. There was a sharp drop in the combined share of the traditional “Big Three” OFDI destinations – the UK, Germany and France – which accounted for only 20% of Chinese investment in Europe (compared to an average of 52% between 2019 and 2023).

Hungary has retained its position as the leading destination, attracting 31% of all Chinese OFDI in Europe – primarily driven by capital-intensive greenfield projects.

Chinese corporate investments in Europe remain concentrated in a few sectors, with new greenfield investments largely focused on electric vehicle (EV) manufacturing and battery storage. However, China’s total OFDI stock in the EV sector remains relatively modest compared to its overall investment stock in Europe.

At the same time, while China is emerging as a leading investor in some countries – such as Hungary – investment from other European countries, the United States and South Korea continues to far exceed Chinese OFDI (albeit it should be higher if one includes investments from Hong Kong).

This upward trend in Chinese investment in Europe may continue into 2025, though there are signs of a slowdown in Chinese EV-related OFDI. Some major M&A deals in 2025 could still push overall investment higher, and greenfield OFDI is expected to remain stable – with two new EV battery plants (including CALB’s facility in Sines, Portugal) confirmed to break ground in 2025.

However, the cancellation of three major EV battery projects raises questions about the sustainability of this growth trajectory since no other sector should have significant compensatory investments. Let us hope that the upcoming 25th EU–China Summit, scheduled for July 2025, will help establish the conditions for increased investment flows in both directions.

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