Report: Firms investing more in Europe

Chinese corporate investment in Europe surged to its highest level in seven years in 2025, with a sharp rise in factory construction, as Chinese companies accelerated efforts to localize operations amid global supply chain shifts and rising trade protectionism.

Chinese foreign direct investment in Europe, including the United Kingdom, climbed 67 percent year-on-year to 16.8 billion euros ($19.6 billion), the highest level since 2018, according to a recent study by Rhodium Group and other industry trackers.

The automotive sector remained the dominant investment destination, drawing 7.6 billion euros, with 93 percent tied to electric vehicle supply chains.

"The core driver is the globalization push by Chinese automakers," said Ron Zheng, a senior partner at Roland Berger and head of its automotive practice in Asia.

"At the same time, Europe's trade barriers and industrial policies are accelerating the shift toward localized production, as companies seek to mitigate tariff risks and meet local production requirements."

Greenfield investment — where companies build new production facilities rather than acquire existing firms — jumped 51 percent from a year earlier to nearly 9 billion euros, setting a record high, the report found.

Analysts say the rebound highlights that Chinese companies are increasingly turning to Europe not only as an export market, but also as a strategic production base.

"The rise in FDI reflects strong complementary demand on both sides," said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation.

"Chinese companies have technology and manufacturing experience, while European markets want investment, especially in sectors linked to industrial upgrading and green transition," Zhou said.

He said greenfield investment has become the dominant model partly because Europe lacks sufficiently mature industrial assets in some emerging sectors that Chinese firms can directly acquire.

Europe's share of China's total global FDI rose from 17 percent to nearly a quarter in 2025, according to the report.

Hungary remained the largest recipient of Chinese FDI, attracting 3.9 billion euros, although its lead narrowed as other major European economies regained momentum, the study found.

Chinese FDI in Germany nearly tripled to 2.5 billion euros, while investment in France quadrupled to 1.9 billion euros, according to the report. Combined, France, Germany and the UK accounted for 34 percent of total Chinese investment in Europe in 2025, up from 23 percent a year earlier.

Spain, Sweden and Cyprus also each attracted more than 1 billion euros, helped by large renewable energy and entertainment deals, including China Three Gorges Corp's acquisition of the Mula solar plant in Spain and Tencent Holdings' purchase of mobile game developer Easybrain in Cyprus.

Zheng from Roland Berger said China's EV sector now possesses the world's most complete supply chain, strong cost-control advantages and fast technology iteration capabilities, making overseas expansion a natural next step as growth in China's domestic auto market moderates.

"Europe is still the global technological center of the combustion engine era and remains a premium, strategically important market. For Chinese automakers to become truly global brands, they must establish themselves in Europe," he said.

Zheng added that localized manufacturing allows companies to move closer to customers, satisfy local content rules and improve brand perception, while reducing exposure to tariffs and antisubsidy probes.

Chinese investment is also reshaping Europe's industrial landscape, Zheng said. While local suppliers may face near-term competitive pressure, deeper integration with Chinese battery and component makers could accelerate Europe's EV transition and strengthen supply chain resilience over the longer term.

"European carmakers including Volkswagen, Mercedes-Benz and BMW are already deepening cooperation with Chinese supply chains to benefit from China's cost advantages and innovation speed," he said.

Zheng added that Chinese automakers are increasingly moving beyond simple vehicle exports toward full-scale localization strategies that include factories, research centers, supplier ecosystems and after-sales networks.

"The model is no longer just about selling cars in Europe. It is about embedding entire industrial chains locally."

lijing2009@chinadaily.com.cn