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, this surge in investment masks a deeper trend: a shift away from greenfield investments towards exports, as Chinese firms prioritize domestic industrial capacity and core technologies. This article explores the factors behind this shift, the implications for Europe, and the future of Chinese investment on the continent.
The Rebound in Chinese FDI
The report by Rhodium Group and MERICS reveals that Chinese FDI in Europe reached a record high of EUR 16.8 billion in 2025, up from EUR 10.1 billion in 2024. This surge was driven by a 89% increase in M&A activity, with three large transactions in consumer goods and gaming accounting for 44% of the total M&A value. Greenfield investments also showed strong growth, reaching EUR 8.9 billion, a 51% increase from 2024.
However, this rebound in FDI is not a return to the pre-2018 levels. The report highlights that the automotive sector, once the dominant driver of Chinese FDI in Europe, has seen its share decline from 52% in 2024 to 45% in 2025. This decline is due to a slowdown in EV investment, as Chinese firms face pushback from European regulators and a shift towards exports.
The Shift Towards Exports
One of the most striking trends in Chinese investment in Europe is the shift towards exports. Despite the surge in FDI, Chinese exports to Europe continued to rise, with particularly strong growth in sectors that had previously attracted significant FDI. Battery exports to Europe increased by 43%, auto exports rose by 15% in value (and 29% in volume), and wind equipment exports surged by 65%.
This shift towards exports is driven by several factors. Firstly, Chinese firms are prioritizing domestic industrial capacity and core technologies, reducing the need for new overseas capacity. Secondly, the weakening Chinese currency has boosted export competitiveness, offsetting some of Europe's trade defenses. Finally, geopolitical uncertainty and macroeconomic conditions have made investing in Europe less attractive, with many firms adopting a wait-and-see approach.
The Implications for Europe
The shift towards exports has significant implications for Europe. On the one hand, it highlights the increasing threat to European industry from Chinese exports. On the other hand, it also presents an opportunity for Europe to rebalance its trade relationship with China, focusing on high-value-added sectors and clean technologies.
However, the report also warns that Europe's regulatory pushback against Chinese investments and green policies may have unintended consequences. By making the EU less attractive to Chinese firms, these measures could reduce the overall attractiveness of the continent as an investment destination. This could lead to a further shift towards exports, as Chinese firms seek to cement their position in European markets.
The Future of Chinese Investment
Looking ahead, the report predicts that Chinese firms will continue to pursue opportunities in global markets, with a focus on exports and domestic industrial capacity. The key question is whether this will translate into a steady increase in outbound investment. If economic, political, and policy conditions do not change substantially, we expect Chinese firms to favor exports.
However, there are a few factors that could offset this trend. Greenfield projects launched in past years will continue to put a floor under Chinese FDI levels in the years ahead. The uptick in Chinese acquisitions in late 2025 could persist in 2026 and contribute positively to the Chinese FDI topline. Exporters who have gained market share may want to cement their position through investments. Chinese firms may also position themselves for the European preference rules laid out in the IAA by setting up or acquiring production facilities.
In conclusion, the surge in Chinese FDI in Europe in 2025 is a temporary phenomenon, driven by a rebound in M&A activity and a shift towards exports. While this presents an opportunity for Europe to rebalance its trade relationship with China, it also highlights the challenges facing the continent in attracting Chinese investment. As Chinese firms prioritize domestic industrial capacity and core technologies, Europe must adapt its policies and strategies to remain an attractive investment destination.
