New development Chinese companies to invest in the EU
Chinese companies to invest in EU going to face new challenges as the European Union is considering new foreign investment rules to increase scrutiny on Chinese companies, potentially requiring technology sharing and local job creation. Look at this recent article from Financial Times
The EU is planning to tighten its foreign investment rules to ensure that Chinese companies do not gain advantage from the bloc’s open market without generating benefits for local workers and sharing technology.
The revised rules, which are still under discussion, are part of a series of proposals that the European Commission will make next month to bolster Europe’s ailing industrial base and flagging economic growth......See more from Financial Times and investment Monitor here
Here’s the truth, these changes are part of a broader effort to protect the EU's industrial base and ensure investments benefit the bloc. Separately, a recent report shows Chinese investment in Europe, particularly in sectors like electric vehicles, continues, with companies like CATL leading the way.
The European Union is developing new policies that could require Chinese companies to share technology and meet local hiring quotas to invest in the bloc.
These potential regulations are being discussed as part of a review of the EU's foreign investment framework, which seeks to protect key industries and ensure Chinese investments bring concrete benefits to the local economy.
Chinese investment in the EU saw an increase in 2024, reversing a seven-year decline, though recent data is limited.
Key developments regarding Chinese investment in the EU include:
Stricter investment rules: The European Commission is considering proposals that would apply conditions to non-EU firms seeking to enter key sectors like electric vehicles (EVs) and batteries. These may include local sourcing requirements for goods and labor.
Targeting of specific sectors: Chinese investment has increasingly focused on the EV and battery sectors, with major players like CATL building new plants in Germany, Hungary, and Spain. However, these investments are now subject to greater scrutiny, with some already labeled as undesirable by the EU.
Geopolitical tensions: Geopolitical issues, including tensions over Taiwan and the war in Ukraine, have strained EU-China relations. In response, the EU is tightening its investment screening, enforcing foreign subsidies regulations (FSR), and considering higher tariffs to address alleged unfair practices and reduce reliance on Chinese supply chains.
Foreign Subsidies Regulation (FSR): The EU's FSR, along with its foreign direct investment (FDI) screening mechanism, has increased compliance costs and legal risks for Chinese firms operating in Europe. China has complained that these measures act as trade and investment barriers.
Investment agreement remains frozen: The EU-China Comprehensive Agreement on Investment (CAI) remains stalled. Despite China's efforts to revive the deal by lifting some related sanctions, there is little interest in Brussels, where many consider the agreement outdated.
Rare earth export restrictions: In November 2025, the EU moved to counter China's restrictions on rare-earth exports by announcing the RESourceEU initiative to fund domestic mineral projects and coordinate EU purchases.
Rise of greenfield investments: In 2023, new greenfield investments from China surpassed mergers and acquisitions (M&A) in the EU. Hungary has emerged as a top destination for Chinese FDI.
China's response: Some Chinese entities have portrayed the EU's measures as counterproductive, arguing they could lead to "decoupling" in key sectors. They have called for a fair and competitive environment within the EU market.
Chinese investment in EU faces a mixed forecast for 2025 and beyond
While overall Chinese outbound investment is expected to show cautious growth, Chinese investment in the EU faces a mixed forecast for 2025 and beyond.
The surge in Chinese greenfield investment in the EV and battery sectors in 2024 is projected to plateau, though existing projects will keep investment levels steady for now.
Increased scrutiny from the EU and member states, coupled with escalating geopolitical tensions and new regulatory barriers, will likely temper future Chinese FDI, particularly in strategic sectors.
Chinese companies will likely concentrate on strategic sectors and specific, more receptive EU countries, while adapting to a tougher regulatory landscape.
Here is getting exciting over China invests in EU Investment trends for 2025 and beyond
Plateauing of EV and battery investment: After a surge in 2024, investment in the electric vehicle (EV) and battery sector is expected to have peaked, with fewer new project announcements, though existing projects will keep investment flowing. Investments may shift toward other sectors such as information technology or renewable energy.
Concentration in Central and Eastern Europe: Chinese investment has become more concentrated in Central and Eastern European countries, notably Hungary and Slovakia, which are seen as strategic locations for Chinese firms to establish a foothold and expand across the continent.
Greenfield over M&A: The shift towards greenfield investments (building new facilities) over mergers and acquisitions (M&A) is expected to continue.
Increased regulatory scrutiny: New EU initiatives and regulations, such as stronger foreign investment screening and the Foreign Subsidies Regulation (FSR), will increase compliance costs and risks for Chinese investors, especially in sensitive sectors. The EU is pushing for member states to adopt more robust screening measures, including mandatory screening for investments in EU-backed projects, critical infrastructure, and critical technology.
Heightened geopolitical tensions: The EU-China relationship is more complex due to geopolitical factors, including trade disputes, divergent views on global issues, and concerns over economic security. The EU will likely toughen its trade stance on China, potentially using tools like the Anti-Coercion Instrument to restrict market access. This has led to an increased focus on de-risking and reducing dependency on Chinese supply chains.
Domestic economic factors in China: Economic headwinds in China, such as a slowdown in internal demand and challenges in the real estate sector, could also influence the level of Chinese outbound investment
Future Chinese investment in the EU
Here's what to know: Reduced volume, increased selectivity: The overall volume of Chinese investment in the EU may continue to be dampened by stricter regulations, geopolitical uncertainties, and domestic Chinese factors. Chinese firms will likely be more selective, focusing on specific strategic sectors and regions where they can navigate the regulatory landscape more effectively.
Shift to greenfield and high-tech: The focus on greenfield projects in high-tech sectors, such as green energy and digital infrastructure, is likely to continue. Chinese companies with competitive advantages in these areas will continue to seek out European markets.
Greater caution: Chinese investors will need to prepare for a more rigorous and cautious regulatory environment, increasing the hurdles for investment, particularly in sectors deemed strategic or sensitive by the EU.
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