"Prince of Ning" Takes the Lead! Report: China's Direct Investment in Europe Grew Last Year for the First Time in Seven Years

According to an analysis of 2024 data by independent research providers MERICS and Rhodium Group, despite Chinese companies increasingly avoiding the UK, Germany, and France, China's direct investment in Europe saw its first growth in seven years in 2024, driven by EV and battery projects in Hungary.

The data showed that China's total foreign direct investment (FDI) in the EU and the UK surged by 47% last year, reaching 10 billion euros.

This figure broke the previous downward trend that had persisted for several consecutive years. Max Zenglein, chief economist at MERICS, said that the EU remains attractive to Chinese investors.

China's direct investment in Europe is primarily driven by large companies. CATL, Tencent, Geely, Envision Technology, and battery maker Gotion High-tech accounted for nearly half of the total investment.

Overall, in the face of increasing political scrutiny and trade tensions, Chinese companies have shifted their focus from mergers and acquisitions (M&A) to greenfield investments in recent years.

Greenfield investments, also known as new-build investments, refer to enterprises established by investment entities such as multinational corporations in the host country, where all or part of the asset ownership belongs to foreign investors. Such investments directly lead to an increase in the host country's production capacity, output, and employment.

The data showed that China's greenfield investments in Europe last year increased by 21% compared to 2023, marking the third consecutive year of growth. Although M&A investments reached 4.1 billion euros last year—a sharp increase of 114%—their base was relatively low.

The report revealed that seven out of China's top ten investments in Europe last year involved the EV and battery supply chain. Four of these involved Hungary.The largest investment remains CATL's 7.5 billion-euro battery factory in Hungary, announced in 2022 (which is accounted for in greenfield investments in batches during the construction period).

The report stated, "CATL once again became the largest investor in 2024, accounting for 16% of the total investment, primarily from its battery plant under construction in Hungary." It added that the battery giant has been China's largest investor in Europe over the past five years.

Hungary has been China's closest partner in Europe in recent years, attracting 31% of China's investment in Europe last year, easily surpassing traditional European powers Germany, France, and the UK. These three European powers collectively accounted for 20% of all Chinese investment in Europe last year, down from the 52% average of the previous four years.

Last week, the Hungarian government also signed a strategic cooperation agreement with BYD. BYD announced that it will open its European headquarters and R&D center in Hungary and expand its existing assembly plant in the Central European hub.

In terms of mergers and acquisitions (M&A), the most representative investment was undoubtedly Tencent's acquisition of Polish video game developer Techland for 1.5 billion euros. However, it is expected that overall M&A activities will remain sluggish. As Chinese enterprises' R&D capabilities have strengthened, the motivation for M&A has weakened.

Yan Dong, the Vice Minister of Commerce of China, stated on May 9 that by the end of 2024, EU enterprises had cumulatively invested over $150 billion in China, while China had cumulatively invested nearly $110 billion in direct investments in Europe. China-EU investment cooperation has entered a "two-way fast lane," with great potential for the future.

Yan Dong pointed out that currently, the world is undergoing accelerated changes over a century, with multiple risks and challenges overlapping. Unilateralism and protectionism are severely impacting international rules and order, making the strategic significance and global influence of the healthy and stable development of China-EU relations even more prominent. China is willing to work with the EU to implement the important consensus reached by leaders of both sides, promote the improvement of bilateral trade and investment efficiency, properly handle economic and trade differences through dialogue and consultation, maintain the security and stability of industrial and supply chains, expand cooperation in green and digital fields, jointly uphold multilateralism and free trade, strengthen coordination on multilateral issues such as climate change and WTO reform, inject more stability and positive energy into China-EU relations, and contribute to global economic recovery.