China’s investment in Europe has reached its highest level since 2018 and surpassed other high-income economies for the first time, a new report shows, although exports remain Chinese companies’ preferred means of doing business.
While Chinese foreign direct investment (FDI) in the US is flatlining at the lowest level in a decade amid geopolitical tensions, China has increased its share of total investment in the more open European market. The region accounted for around 25% of Chinese global investment in 2025, up from 17% in 2024, according to a joint report by Rhodium Group and the Mercator Institute for China Studies (MERICS), a Berlin-based think tank.
China invested EUR 16.8 billion (USD 19.5 billion) in Europe, including the UK, last year, according to the report. That was up 67% on the year, with 42% directed toward the electric vehicle supply chain. Mergers and acquisitions drove the growth, jumping 89% to EUR 7.9 billion (USD 9.2 billion), while greenfield investment—building facilities from the ground up—increased 51% to EUR 8.9 billion (USD 10.3 billion).
The growth comes as Chinese companies chase overseas opportunities to offset sluggish economic conditions at home and get around trade friction. Despite the rise in completed investments last year, however, the total in Europe was still less than half the peak in the middle of the last decade, as overall outbound flows remain far lower. The report also stresses that newly announced transactions were subdued in 2025, at EUR 5.2 billion (USD 6 billion), versus EUR 16.9 billion (USD 19.6 billion) worth of plant and equipment announcements in 2023.
“Beijing’s focus on building up domestic industrial capacity and keeping core technologies and know-how at home will continue to weigh on outbound foreign direct investment,” the report said. “Meanwhile, persistently weak domestic demand and low profit margins in China, as well as an undervalued yuan, will encourage Chinese firms to continue to use exports as the main channel for selling their goods abroad.”
Chinese exports to Europe continued to climb, particularly in sectors that have also attracted major Chinese investment. Auto export volumes rose 15%, battery shipments increased 43%, and wind equipment exports surged 65%.
The report argues that even with the European Union’s anti-dumping and countervailing duties, which the authors estimate only cover about 9% of China’s exports to Europe, the European single market is still “a relatively open market for China.”
“The key question is whether Chinese firms will continue to rely heavily on exports for their overseas sales, or whether we will see a steady increase in levels of outbound investment,” the report said. “If economic, political and policy conditions do not change substantially, we expect Chinese firms to favor exports.”
Chinese scholars complain that the EU is adopting decoupling policies toward China, and trade tensions are rising as the bloc considers a slew of measures to counter the influx of Chinese goods.
In December, the EU opened an in-depth investigation into security inspection products maker Nuctech over concerns that the partially state-owned company may have benefited from subsidies, giving it an unfair competitive advantage in Europe. Tensions intensified last week as Beijing ordered Chinese entities not to assist with the EU’s probe, arguing that Europe’s use of the Foreign Subsidies Regulation in the case constitutes “unjustified extraterritorial jurisdiction.”
Scrutiny of FDI is growing as well. In December, the EU reached a provisional political agreement to revise its FDI screening regulation to enhance economic security, introducing mandatory national review mechanisms, broader scrutiny of indirect investments through EU subsidiaries, and unified baseline rules for critical sectors across member states.
Proposals to give the European Commission the power to override national screening decisions were dropped following opposition from the European Council.
The Rhodium-MERICS report said that high costs and regulatory barriers in Europe could limit its appeal to Chinese investors, while delays and political compromises may slow EU efforts to bring more production onshore.
At the same time, it says that Brussels may remain cautious about taking trade measures against China, wary of potential retaliation, particularly involving critical minerals, as well as uncertainty surrounding US tariffs. “This will leave European markets broadly open to Chinese exports in the medium term,” while giving Chinese companies “fewer reasons to invest in the EU.”
Hungary remained the top destination for Chinese investment in Europe, attracting EUR 3.9 billion (USD 4.5 billion), followed by Germany at EUR 2.5 billion (USD 2.9 billion) and France with EUR 1.9 billion (USD 2.2 billion). Three of the ten largest ongoing Chinese investment projects in Europe—by Contemporary Amperex Technology (CATL), BYD, and Sunwoda Electronic—are located in Hungary.
Hungary’s share of total Chinese investment in Europe fell to 23% in 2025, from 32% a year earlier, as no new major projects were announced, according to the report. Instead, momentum has shifted toward Germany and Spain, where investment rose 88% and 147%, respectively. Germany ranked second after Hungary in EV-related investment, followed by Spain.
At a briefing to unveil the report, MERICS analyst Andreas Mischer acknowledged that Europe faces a dilemma over whether to seek more or less Chinese investment. “Ideally, we would still attract Chinese investments in the automotive sector and so on, but while at the same time making sure that local value and local spillovers are actually created.”
That could require setting conditions like hiring quotas and technology transfers, without creating so many hurdles that investors “abandon the European market altogether.”
Gregor Williams, associate director with Rhodium Group’s China corporate advisory team, said that ultimately, “Europe needs to realize its advantage, which is access to its market.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.
Note: EUR figures are converted to USD at rates of EUR 0.86 = USD 1 based on estimates as of May 22, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.