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Xiaofei Xu

Chinese investment in Europe hit a seven-year high of €16.8 billion (US$19.5 billion) in 2025, driven by a strong rebound in mergers and acquisitions (M&A) and record greenfield completions, a new report has found.
But the annual study, published on Tuesday by Rhodium Group and the Mercator Institute for China Studies, cautioned that the pipeline may be thinning, with newly announced projects falling under pressure from Beijing’s push to retain industrial capacity at home and Europe’s growing regulatory barriers.
Chinese foreign direct investment in Europe – including the United Kingdom – rose 67 per cent year on year in 2025, as China’s investors increasingly focused on the region. Europe’s share of China’s total global FDI jumped from 17 per cent to nearly a quarter, according to the two think tanks.
M&A activity drove the rebound, rising 89 per cent year on year to €7.9 billion, while greenfield investment hit a record €8.9 billion, retaining its position as the primary channel for Chinese investment in the region.
Hungary remained the most popular European destination for Chinese FDI last year, attracting €3.9 billion of investment, but the nation is starting to lose its commanding lead over traditional strongholds such as Germany and France, the study found.
Several Chinese electric car and battery giants launched multibillion-euro factory projects in Hungary earlier this decade, but no similar deals were announced in 2025 and Budapest’s share of China’s FDI in Europe shrank to 23 per cent from 32 per cent in 2024.
Meanwhile, Berlin and Paris caught up at a stunning speed. Completed Chinese FDI in Germany almost tripled to €2.5 billion and quadrupled in France to €1.9 billion. Europe’s traditional “big three” economies – France, Germany and the UK – saw their combined share of Chinese investment leap from 23 per cent to 34 per cent in 2025.
Spain, Sweden and Cyprus also attracted more than €1 billion each, driven by big deals in the renewable energy and entertainment sectors, such as China Three Gorges’ acquisition of the Mula solar plant in Spain and Tencent Holdings’ purchase of mobile game developer Easybrain in Cyprus.


In terms of sectors, Chinese investment was still heavily concentrated on the automotive industry, with €7.6 billion of deals completed in 2025. Entertainment was the second most popular category at €2.3 billion, followed by consumer products and services at €2 billion.
Much of the automotive investment was driven by China’s flourishing electric vehicle brands, with deals increasingly spreading beyond Hungary to countries including Germany, Spain and Slovakia.
The surge in Chinese greenfield projects might ease some nerves across European capitals, where fears are rising about Chinese exports undercutting local industrial bases. But the report also cast doubt on whether this momentum would continue or help rebalance trade between the two sides.
Chinese firms still often favour exporting directly from China to investing in Europe, driven by a mix of factors including Europe’s high production costs, the market’s relative openness to Chinese imports, a weak yuan boosting export competitiveness, and domestic overcapacity reducing the need to build new facilities abroad, the report said.
Moreover, Chinese FDI in Europe is coming under pressure from governments on both sides, as Beijing prioritises domestic industrial capacity over overseas expansion and Brussels subjects Chinese investment to intensifying scrutiny, according to the study.
Europe’s tightening regulatory framework – from local content rules to the proposed update to the Cybersecurity Act – risks backfiring by making the European Union a less attractive destination for Chinese investment, rather than drawing more of it in, the report cautioned.
“They may choose to delay investment decisions until there is more clarity on the key elements of these proposals, which must still be approved by the European Parliament and member states,” it said.
The “Made in Europe” requirements for public procurement in the proposed Industrial Accelerator Act (IAA) could also “threaten the viability of existing projects such as BYD’s Hungary plant and raise the bar for future investments”, according to the report.
The European market also is likely to remain relatively open to Chinese exports in the medium term, the study said. Policies designed to onshore more production, such as the IAA, will take up to two years to put in place. Meanwhile, there is the possibility that China could retaliate, with US tariff policies limiting Brussels’ ability to respond.


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But study warns that new project pipeline appears to be drying up, as Chinese investors face pressure from both Beijing and Brussels


But study warns that new project pipeline appears to be drying up, as Chinese investors face pressure from both Beijing and Brussels.


Chinese investment in Europe surges to 7-year high despite rising trade tensions

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}But study warns that new project pipeline appears to be drying up, as Chinese investors face pressure from both Beijing and Brussels

But study warns that new project pipeline appears to be drying up, as Chinese investors face pressure from both Beijing and Brussels