BOFIT Weekly Review 22/2025
Investment in EV plants and infrastructure drove much of the increase in Chinese FDI in Europe last year
The Merics and Rhodium Group think tanks last week released their updated 2024 assessment of Chinese investment in the EU and UK. China’s direct investments in the EU and UK last year were estimated to be around 10 billion euros, or nearly double 2023 investment. It was still well below China’s 2016 European foreign direct investment (FDI), however, which exceeded 50 billion euros. According to the updated report, the EU and the UK last year accounted for about a fifth of China’s outward FDI with over half of that investment going to high-income countries.
China’s greenfield FDI in the EU and UK amounted to nearly 6 billion euros, while corporate acquisitions were valued at roughly 4 billion euros. The sharp increase in greenfield investment in recent years largely reflects investment in the electric vehicle (EV) sector. Over half of all Chinese FDI in Europe last year involved building of production facilities for EVs and batteries (5.2 billion euros).
Chinese firms are making large investments in EV production, especially in Hungary, the current destination for over 60 % of the sector’s investment. EV sector investment accounted for nearly a third of total Chinese FDI flows to Europe (3.1 billion euros) last year. The report notes, however, that China’s FDI footprint in Hungary is still relatively small. China is only the sixth largest FDI provider in Europe after South Korea. Not counting Hungary, the largest Chinese investments in the EV industry last year went to Germany and Slovakia. China’s enthusiasm for greenfield investment seems to be waning. The value of declared new EV investment in 2024 was just 3 billion euros, after averaging 15 billion euros a year in previous years. Cancellations of announced projects were also up last year. For example, the SVOLT Energy Technology Company has abandoned its plans for two mega-projects in Germany. SVOLT also announced last year that it was pulling out of its battery plant project in Kotka, a city on Finland’s southeastern coast.
China’s investments in Europe largely come from just a few firms. Last year, five companies (CATL, Tencent, Geely, Envision and Gotion) accounted for about half of Chinese investment in Europe. Additionally, a handful of companies accounted for the lion’s share of corporate acquisitions. The largest Chinese acquisition in Europe last year was Tencent’s purchase of Polish video game maker Techland for 1.5 billion euros.
Rhodium Group, which tracks Chinese FDI in its China Cross-Border Monitor, estimates that China’s total outward FDI last year amounted to $65 billion. The value of significant announced FDI projects ($88 billion) was higher than the realised amount. China’s own figures give a quite different and even contradictory picture of investment trends. Commerce ministry figures show that the value of Chinese FDI last year increased from 2023 to $163 billion. According to the balance-of-payments figures released by the People’s Bank of China, outward FDI flows contracted sharply, but were still $172 billion.
Inward FDI flows show a particularly large disparity between commerce ministry and the PBoC’s balance-of-payments figures. While the commerce ministry reported a sharp drop in FDI last year from 2023, it still amounted to $116 billion. Balance-of-payments figures, the contraction in foreign investment was substantially faster last year and the inflow valued at just $19 billion. Although international comparisons typically look first to China’s commerce ministry FDI figures, they are based on FDI reported by companies and not actual flows. In contrast, balance-of-payments figures are internationally comparable and based on actual cross-border investment flows. The balance-of-payment figures also take into account such items as financial flows related to sale of investments, repatriation of profits and intra-group financing between parent companies and their subsidiaries. China’s balance-of-payment items are not broken down into greater detail, however. Total direct capital investment and reinvestment of profits by foreign firms operating in China last year amounted to $73 billion, but at the same time foreign firms also paid down a substantial amount of debt owed to owners ($54 billion) last year.
Statistical reporting of China’s inward and outward foreign direct investment (FDI) flows varies considerably.
Sources: SAFE, China’s Ministry of Commerce, CEIC, Rhodium China Cross-Border Monitor and BOFIT.