China's investment in Europe rose for the first time in seven years in 2024, due to a surge in electric vehicle and battery projects in Hungary, even as Chinese companies increasingly shunned the UK, Germany and France.
China's foreign direct investment in the EU and the UK climbed 47% to 10 billion euros last year, according to Berlin-based Mercator China research and consulting firm Rhodium Group.
Although the rebound marked a breakthrough in the downtrend, the total FDI accounted for only one-fifth of the peak in 2016 and was concentrated in a small number of companies, including battery manufacturers CATL and Envision, Tech Group Tencent and Carmaker and Carmaker Geely.
“The EU remains attractive to Chinese investment,” Max Singling said,,,,, Merics' chief economist. But he warned that Beijing could increasingly use corporate investment as a “tool of strategic influence.”
Faced with increasing political scrutiny and trade tensions, Chinese companies have shifted from mergers and acquisitions to Greenfield investments. CATL's 7.5 billion euro battery facility in DeBrecen and the 500 million euro Szeged electric vehicle factory (both in Hungary) planned by BYD.
Hungary, which accounted for 31% of all Chinese investment in Europe in 2024, maintained its highest destination position for the second consecutive year. By comparison, the combined share of the UK, Germany and France fell to just 20%, down from the average of 52% over the past five years.
Prime Minister Viktor Orbán, widely regarded as China's closest supporter in the EU, believes that the Chinese capital provides an important pillar for the economy amid weak domestic growth.
Chinese automakers are under pressure to expand abroad as they cope with overcapacity and staggering demand at home. In October last year, the EU decided to impose tariffs of up to 45% on Chinese automobile imports, further inspiring local production within the group.
However, the study notes that new investment announcements for Chinese electric vehicle manufacturers have dropped sharply - down 79% last year, while levels fell 79% from 2022 to 2023. For example, battery maker Svolt abandoned plans for two factories in Germany worth €4.2 billion, while the European Commission investigated preliminary foreign subsidies for the Bit Hungarian plant, which could further curb momentum.
Moderate rises in mergers and acquisitions partially offset the decline. Tencent acquired Polish video game developer Techland for 1.5 billion euros, although such trading activity is expected to remain the same. As China establishes its own R&D capabilities, the traditional motivation for mergers and acquisitions - mergers and acquisitions - enters Western technology.
China's investment in strategic sectors such as renewable energy has also been further scrutinized across Europe. However, the authors of the study see the scope of short-term easing of tensions as some EU member states try to avoid simultaneous trade conflicts with Beijing and Washington, while China updates its charm offensive against Brussels.