China's investment in Europe rebounds against the trend: From market logic to strategic restructuring

I. Capital Returning to Europe: A Neglected Signal

In 2024, China's direct investment in Europe saw its first significant rebound in seven years. According to joint monitoring data from the Rhodium Group and the Mercator Institute for China Studies, China's total investment in the EU and the UK reached €10 billion, up 47% year-on-year. Although this figure is only one-fifth of the 2016 peak, it reversed the narrative of long-term decline, marking a new stage in the overseas allocation of Chinese capital.

Notably, this rebound is not an isolated European phenomenon. Globally, China's outbound direct investment rebounded to €52 billion for the first time after seven consecutive years of decline. But Europe's performance was particularly prominent—it absorbed 53.2% of Chinese investment flowing to high-income economies, and its share of China's total outbound investment rose from 15.4% in 2023 to 19.1%, the first significant increase since 2018.

Changes in the direction of capital flows often reveal deeper trends more than any single data point. While Chinese companies face continued pressure in the United States and the share of investment in emerging markets has expanded to 64%, Europe remains the most important destination for Chinese capital among advanced economies. This pattern of "when the East is dark, the West is bright" reflects both the restructuring of global supply chains and the strategic response of Chinese companies to trade barriers.

II. Structural Shift: Greenfield Investment Leads, M&A Revives

An important feature of the 2024 rebound in Chinese investment in Europe was the dual-engine drive of greenfield investment and M&A deals. Greenfield investment grew for the third consecutive year, reaching a record €5.9 billion, accounting for 59% of total investment and continuing to play the dominant role. M&A investment, after falling to its lowest level since 2009 in 2023, rebounded sharply, doubling to €4.1 billion.

The recovery in M&A was not broad-based but concentrated in a few large deals—Tencent acquired Polish game developer Techland for €1.5 billion, Haier acquired Carrier's Dutch commercial refrigeration business for €716 million, and AAC Technologies acquired Belgian acoustics company PSS NV for €475 million. Together, these three deals accounted for nearly two-thirds of total M&A value. They point to a common trend: Chinese companies' overseas M&A is no longer about scale expansion, but about precisely acquiring technology brands, channels, and niche market capabilities to create synergies with their core businesses.

Greenfield investment, by contrast, was almost entirely centered on the electric vehicle supply chain. EV-related projects absorbed €4.9 billion, accounting for 83% of all greenfield investment, a share that has soared from 17% in 2021. The midstream—battery manufacturing and upstream materials—became the most investment-intensive segment. CATL's factory expansion in Debrecen, Hungary; Envision AESC's battery base in Douai, France; and BYD's vehicle plant in Szeged, Hungary constituted the landmark projects of Chinese investment in Europe in 2024.This shift in investment structure mirrors the repositioning of China's industrial competitiveness. Over the past decade, Chinese investment in Europe was dominated by traditional sectors such as machinery, home appliances, and finance; today, clean technology and new energy vehicles have taken their place. The EU has become a bridgehead for Chinese companies to circumvent tariff barriers and draw closer to global high-end markets, while European countries' competitive courting of Chinese investment has further amplified this effect.

3. Geographical Reshaping: Hungary's Rise and the Stalling of the "Big Three"

The map of Chinese investment in Europe changed dramatically in 2024. For the second consecutive year, Hungary was the largest recipient, attracting €3.1 billion in Chinese investment, up 73% year-on-year and accounting for 31% of China's total investment in Europe. Of the top ten Chinese investment projects in Europe in 2024, four were located in Hungary—including three EV battery plants and one vehicle assembly plant.

By contrast, the combined share of the three traditional destinations—the United Kingdom, Germany, and France—plummeted from an average of 52% between 2019 and 2023 to 20%. The Chinese investment absorbed by the three countries fell sharply, with no signs that this trend is about to reverse.

This geographical shift is no accident. Hungary has been able to emerge as a new force because it offers multiple strategic advantages: labor costs far lower than in Western Europe, unimpeded access to the EU market, and a policy environment friendly to Eastern investors—including tax incentives, employment subsidies, and lenient foreign investment screening. At the same time, the Hungarian government has elevated the EV industry to a national strategy, actively aligning with the needs of Chinese companies and creating an "industrial hub" effect.

In a sense, the large-scale deployment of Chinese companies in Hungary represents a "second siting" of globalized production networks within Europe. As Western European countries grow increasingly wary of sensitive investment from China, Central and Eastern European countries offer alternatives with a more proactive posture—driven by both industrial logic and geoeconomic competition.

It must be noted, however, that China's investment stock in Europe remains limited. Even though EV projects have drawn much attention, China's EV-related investment stock is still negligible compared with Europe's overall foreign investment stock, Europe's investment stock in China, and the scale of China-EU trade. Hungary has indeed become a prominent destination for Chinese investment, but investors from within the EU, the United States, and South Korea still dominate in multiple industries.

4. Regulatory Game: Europe's "Defensive Openness" and China's "Selective Approval"

While Chinese investment in Europe rebounds, Europe's investment screening mechanisms are undergoing systematic expansion. Over the past year, the EU has pushed at the supranational level to establish a more unified investment screening framework, requiring member states to strengthen scrutiny of transactions involving critical infrastructure, advanced technology, and sensitive data. Some member states have begun discussing stricter restrictions on Chinese greenfield investment—restrictions that in the past were applied mainly to M&A transactions.The tightening of policies reflects Europe's deep-seated contradictions: on the one hand, it hopes to attract Chinese capital, especially the electric vehicle industry chain, to advance its own energy transition and industrialization; on the other hand, it worries about technology outflow, market dependence, and geopolitical security risks. Consequently, "defensive openness" has become the mainstream policy stance—welcoming Chinese investment that aligns with Europe's strategic goals while using industrial policy, trade remedies, and review tools for targeted screening.

From China's perspective, controls on capital outflow are also quietly tightening. The Chinese government's review of corporate overseas investment places greater emphasis on technology protection and national security, forming a "reverse symmetry" with Western scrutiny. Chinese investors face more constraints on M&A in overseas high-tech sectors, which partly explains why the greenfield-led investment model is becoming increasingly prevalent—it can bypass M&A reviews while retaining control over technology supply chains.

The policy orientations of both sides are becoming more rational and fine-tuned. Chinese capital is no longer expanding blindly, and Europe is no longer accepting all comers. This process of mutual jockeying and mutual adaptation has shaped the new normal of China-EU investment.

5. Outlook: Inertial Growth Coexisting with Structural Risks

Looking ahead to 2025, Chinese investment in Europe is likely to sustain its recovery inertia. The advancement of several large M&A deals and the start of construction of two EV battery plants in 2025 will support investment levels. But the deeper question lies in: can the EV-driven growth model be sustained?

The value of newly announced Chinese electric vehicle project investments in 2024 dropped sharply, while three major European battery projects were cancelled. This indicates that, as Europe imposes additional tariffs on Chinese EVs, market demand growth slows, and core enterprises adjust their overseas expansion phases, the early "influx-style" greenfield investment boom is cooling down. At present, no other industry can fill the gap left if EV investment slows.

From a longer-term perspective, Chinese investment in Europe is entering a stage of "digesting existing stock and remaining cautious about new increments." Greenfield investment will continue to be the main form, but investment quality, compliance requirements, and the ability to integrate into the local industrial ecosystem will become the focus of competition. Europe will no longer be merely a market to develop, but an important testing ground for Chinese enterprises' globalization—where the interplay of capital, technology, and policy will determine the underlying tone of China-EU economic relations for the next decade.

Whether for multinational enterprises repositioning themselves in Europe, or for policymakers attempting to seek balance in the China-US-Europe triangle, this round of investment fluctuation provides a window of observation: the restructuring of global capital is moving from grand narratives to concrete strategic games, and the structural changes in China's investment in Europe are precisely a vivid footnote to this game.