Introduction: A Belated Turning Point
In 2024, China's foreign direct investment (FDI) in the European Union and the United Kingdom ended seven consecutive years of decline, reaching €10 billion, a year-on-year increase of 47%. This was the first significant rebound since 2016. On the surface, this figure is still only one-fifth of the 2016 peak, but its directional significance far outweighs its scale: against the backdrop of ebbing globalization and intensifying geopolitical frictions, Chinese capital has once again identified Europe as a key destination, and the investment structure has undergone a fundamental shift.
To understand this turning point, one cannot stop at the narrative of "China is back." The deeper logic is that Chinese companies are using capital to redefine their relationship with Europe—shifting from market access to manufacturing embeddedness, from acquiring brands to greenfield plant construction, and from traditional industries to green technologies. This is both a microcosm of global supply chain restructuring and a sign that China-Europe economic relations have entered a new phase.
Why Europe Has Become the Focus Again: From Trade Circumvention to Supply Chain Resilience
China's global outbound investment also stopped declining and rebounded in 2024, totaling approximately €52 billion, with Europe absorbing 19.1% of it—the first significant increase in its share since 2018. In contrast, Chinese investment in the United States continued to decline, falling below €2 billion for the full year, accounting for only 4% of global outflows.
This geographic shift is no accident. The United States' continued escalation of technology blockades and tariff barriers against China has relatively increased Europe's strategic weight in Chinese companies' overseas layouts. But the deeper driver is the leap in competitiveness of Chinese companies themselves. In electric vehicles, batteries, clean technology, and other fields, China is no longer a low-cost follower but a technology leader. When competition in the domestic market becomes intense and capacity utilization comes under pressure, overseas greenfield investment becomes a rational choice for absorbing capacity, getting closer to markets, and circumventing trade barriers.
It is worth noting that the growth of Chinese investment in Europe in 2024 was driven by two engines: greenfield investment grew for the third consecutive year, reaching a record €5.9 billion, accounting for 59% of total investment; while M&A investment rebounded from the trough of 2023 to €4.1 billion, a year-on-year increase of 114%. Major deals such as Tencent's acquisition of Polish game developer Techland (€1.5 billion) and Haier's acquisition of Carrier's commercial refrigeration business (€716 million) show that Chinese capital's footprint in consumer technology and high-end manufacturing continues to deepen.
The Hungary Phenomenon: The Rise of Central and Eastern Europe as a New Manufacturing Outpost
The most notable change in the geographic landscape of Chinese investment in Europe in 2024 was that Hungary became the largest recipient for the second consecutive year, attracting €3.1 billion, accounting for 31% of China's total investment in Europe. Meanwhile, the combined share of the three traditional destinations—the United Kingdom, Germany, and France—fell sharply to 20%, far below the average of 52% between 2019 and 2023.Hungary’s emergence as a focal point is no accident. It sits at the heart of Europe, with labor costs that are competitive relative to Western Europe, and its government has offered active incentive policies for the electric vehicle supply chain. More importantly, Hungary has become a manufacturing hub for Chinese battery companies in Europe. In 2024, four of China’s top ten investment projects in Europe were located in Hungary, including CATL’s battery plant (€1.6 billion) and BYD’s electric vehicle plant (€1.4 billion). These projects are not only massive in scale, but also mark a shift in Chinese investment from “market entry” to “capacity embedding”—Chinese manufacturers are building long-term operational assets in the heart of Europe.
This regional shift also reflects an industrial rebalancing within Europe. Western European countries, after experiencing deindustrialization, have become less attractive for large-scale manufacturing projects; Central and Eastern European countries, by contrast, are leveraging cost advantages and policy flexibility to become new gateways for Asian capital entering Europe. The arrival of Chinese capital has, objectively, accelerated the eastward shift of Europe’s automotive supply chain and reshaped the division of labor within the EU.
The Geoeconomic Logic of Green Technology and the EV Supply Chain
Automotive-related investment remains the absolute mainstay of Chinese capital flowing into Europe, reaching €5.2 billion in 2024, up 57% year-on-year and accounting for more than half of total investment. Among this, EV-related greenfield projects accounted for 83% of China’s greenfield investment in Europe, a share that has climbed steadily from 17% in 2021, reflecting Chinese capital’s intense focus on the energy transition track.
Behind this concentration lies a clear industrial logic. The EU’s policy framework banning the sale of new petrol and diesel cars by 2035 has created enormous, predictable demand for EV components; meanwhile, China has built a complete supply chain advantage in batteries, electric drives, and electronic controls. By setting up factories in Europe, Chinese companies can both bypass import tariffs and quota barriers and respond more closely to the localization procurement needs of European automakers. CATL’s plant in Hungary, Envision Power’s factory in France, and BYD’s vehicle project in Hungary are all manifestations of this strategy.
However, this investment structure’s heavy reliance on a single industry also harbors risks. In 2024, the value of newly announced EV-related projects from China fell sharply, and three large battery projects were canceled. This reminds us that Europe’s acceptance of Chinese green investment is not without limits—political resistance, subsidy competition, and concerns over technology transfer could all become sources of uncertainty for project implementation.
Policy Game: Europe’s Tightening Review and Chinese Capital’s Adaptive Strategies
Europe’s attitude toward Chinese investment is shifting from “welcome” to “conditional acceptance.” The activation of the EU Foreign Subsidies Regulation (FSR), along with generally strengthened foreign investment review mechanisms across member states, has subjected Chinese greenfield projects to stricter compliance requirements. The trends of 2024 indicate that Europe is extending its review scope from M&A to greenfield investment, and has even begun discussing the imposition of investment thresholds on specific sectors.Meanwhile, China is also tightening its regulation of capital outflows and paying increasing attention to the risk of core technology outflows. This two-way constraint means that Chinese investment in Europe is no longer a simple export of capital, but a complex policy game. Companies must strike a balance between market access in Europe and technology security at home, which is reflected in deal structures: a greater preference for joint ventures and technology licensing over wholly-owned acquisitions, and a stronger emphasis on plant construction rather than the relocation of R&D centers.
It is worth noting that despite intensifying friction, the absolute scale of Chinese investment in Europe remains relatively limited. The stock of Chinese investment related to electric vehicles is negligible when set against the EU's overall FDI stock, the EU's investment stock in China, and the volume of EU-China trade. This shows that the "presence" of Chinese capital in Europe does not match its trade influence. There is still room for growth in the future, but the growth path will depend more on political trust and institutional arrangements.
Looking Ahead: Short-Term Rebound and Long-Term Structural Challenges
In 2025, Chinese investment in Europe will most likely maintain its resilience. The potential completion of large M&A deals and the groundbreaking of at least two new battery plants could drive investment volumes even higher. In the long run, however, the challenges cannot be ignored.
First, the momentum of EV investment is slowing. The sharp decline in newly announced projects and project cancellations indicate that Chinese investors are reassessing the uncertainty of Europe's policy environment. If no other industry fills the gap, investment in Europe could fall again. Second, protectionist tendencies within Europe, as well as the spillover effects of U.S. technology restrictions on China, will continue to raise the institutional costs for Chinese capital entering Europe. Finally, China's own domestic economic restructuring and capital controls will also constrain the elasticity of outbound investment volumes.
From a broader perspective, the rebound in 2024 may be a watershed moment: Chinese investment in Europe is moving from a phase of "tentative expansion" to one of "strategic deep cultivation." The rise of Central and Eastern European countries such as Hungary, the central role of green technologies, and the dominance of greenfield projects all point to a future form of China-EU industrial capital linkages that is more regional and technology-oriented. This linkage is neither short-term arbitrage nor one-way dependence, but a complex symbiotic relationship formed amid the restructuring of global industrial chains.
For policymakers and investors alike, the real challenge is not to dwell on the ups and downs of investment volumes, but to figure out how to translate interdependent industrial interests into an institutionalized framework for cooperation in an increasingly uncertain world. Whether Chinese capital can find a sustainable foothold in Europe will depend on whether both sides can move beyond geopolitical anxiety and return to the fundamentals of technology and market demand.