Chinese Investment in Europe Shifts Toward Local Manufacturing

According to MERICS & Rhodium Group tracking in 2025, Chinese foreign direct investment (FDI) in Europe increasingly focuses on localized manufacturing and strategic industrial infrastructure. According to a joint study by the Mercator Institute for China Studies and the Rhodium Group, Chinese outbound FDI into Europe rose by 67 per cent to 18 billion USD in 2025, marking the highest level recorded in seven years. The investment strategy increasingly emphasizes greenfield projects, which reached a record value of 10 billion USD. Battery factories and electric vehicle infrastructure remain central drivers of this expansion. At the same time, mergers and acquisitions (M&A) rebounded strongly, growing by 89 per cent to 9 billion USD.

Throughout 2025, the automotive sector dominates Chinese investment activity in Europe, attracting approximately 8 USD billion and accounting for 45 per cent of total investment flows. Most of this capital targets electric vehicle assembly facilities and lithium-ion battery production plants. Regionally in 2025, Hungary continues to emerge as the primary destination for Chinese clean-tech investment, receiving 4 billion USD in capital inflows. Germany follows with 3 billion USD and significantly expands its share of European-bound Chinese investment, while France also experiences substantial growth, securing 2 billion USD in investment and strengthening its position within the European manufacturing landscape.

Industry observers note that this shift toward localized production partly responds to European anti-subsidy measures and trade defense policies. By establishing manufacturing facilities within Europe, Chinese firms seek to maintain market access while reducing exposure to tariffs and regulatory restrictions.

In contrast, European investment activity in China remains stable but highly concentrated among a limited number of large industrial corporations. According to Rhodium Group tracking ("The Chosen Few"), companies such as Volkswagen, BMW, and BASF continue to invest heavily in localized operations.

This investment environment contributes to the emergence of a more defensive corporate strategy. European companies increasingly prioritize local production, regional research and development, and operational self-sufficiency in response to intensifying market competition and geopolitical uncertainty.