Chinese Investment in Europe - A Country-Level Approach

By European Think-tank Network on China (ETNC)

Sizing Up Chinese Investments in Europe

Chinese investments in Europe have surged in recent years, and have become a critical feature of Europe-China relations. Foreign direct investment (FDI) in the European Union traced back to mainland China hit a record EUR 35 billion in 2016, compared with only EUR 1.6 billion in 2010, according to data gathered by the Rhodium Group. In a historic shift, the flow of Chinese direct investment into Europe has surpassed the declining flows of annual European direct investments into China. As China continues to grow, develop, and integrate into the global economy, its overseas investments expand in quantity and quality, reflecting both the growing sophistication of the Chinese economy and broader Chinese commercial and policy goals. Going beyond FDI, Chinese investment is creating new realities for Europe-China relations.

This report by the European Think-tank Network on China (ETNC) brings together original analysis from 19 European countries to better understand these trends and their consequences for policy making and Europe-China relations, including at the bilateral, subregional and EU levels. As in all ETNC reports, it seeks to do so using a country-level approach. Through these case studies, including an introductory explanation and analysis of EU-wide data, the report aims to identify and contextualize the motives for Chinese investment in Europe and the vehicles used. However, the originality of the report also lies in the analysis of national-level debates on China, Chinese investment, and openness to foreign investment more generally. This is not just a story about FDI strictly defined, but about the (geo)political implications that emanate from deeper economic interaction with China. Ultimately, Europe is far from speaking with a single voice on these matters, and identifying where the divergences and convergences lie, will be crucial in formulating solid and complementary policy positions at the EU and national level moving forward.

China’s growing investment interests in Europe

Until recently, it was not uncommon to depict China as a minor source of investment in Europe and elsewhere in relative terms. Indeed, of total FDI stock held in the European Union by the end of 2015, China only accounted for 2 percent according to Eurostat figures, and its investment stock in many European countries remains low when compared with older investors. However, the facts on the ground are evolving rapidly, and China still has plenty of room to grow: The total stock of Chinese outbound direct investment worldwide still only represents 10 percent of its national GDP. Compare this to France or the UK (50+ percent), Germany (39 percent), the United States (34 percent) and Japan (28 percent). If China continues on its path towards more advanced levels of economic development, we must expect a massive further increase in its outbound FDI. Europe has already become a favored destination for Chinese investment, and policymakers need to adapt to a new force shaping the economic and political landscape in Europe.

As the country analyses of this report show, European economies have a wide range of assets and features that Chinese investors seek. There should be no doubt that China needs Europe (maybe even more than vice-versa). Patterns of Chinese investment highlight sources of European attractiveness that need to be better appreciated and leveraged. Among the things that Chinese investors seek in Europe are:

  • Technology, to include established high-tech assets, emerging technologies and know-how;
  • Access to the European market, for Chinese goods and services;
  • Access to third markets via European corporate networks, especially in Latin America and Africa;
  • Brand names to improve the marketability of Chinese products both abroad and for the Chinese market;
  • Integrated regional and global value chains in production, knowledge and transport;
  • A stable legal, regulatory and political environment, particularly in a context of global disruption and political uncertainty;
  • Political/diplomatic influence in a region that in aggregate terms remains the second largest economy after the US.


Behind the growth in China’s outbound investments is the story of China’s economic transformation towards more consumption-based growth and higher value-added industries, including technology and services. The success of China’s economic transformation depends on an increased commercial presence abroad and deepening international linkages. This is not only true for all economic enterprises in China, including SOEs and private companies, but it also serves as a critical source of Party legitimacy and political stability.

In this context, many chapters in this report confirm the importance of Beijing’s policy initiatives in shaping investments overseas, and in Europe in particular. Beijing’s “going out” policy starting in 2001, and intensifying after the Global Financial crisis, has facilitated and encouraged the internationalization of Chinese firms for much of the last two decades as a means to develop the national economy. More recently, both China’s 12th and 13th five-year plans (2011-2015; 2016-2020) have encouraged overseas investments as a means to access supply chains, quality brand names and advanced technology – all reasons for investing in Europe. As China’s industrial strategy grows in sophistication, plans such as “Made in China 2025” will increasingly channel overseas investments as a means to achieve clear policy goals in the so-called “new strategic industries” defined in Beijing. In 2016, the largest share of Chinese global mergers and acquisitions targeted the high-tech sector (24 percent of total deal values), compared to 20 percent that targeted energy and material assets (Rhodium Group, 2017). The controls on outbound Chinese capital that the Chinese government deployed in 2016 and 2017 also highlight the crucial impact of Beijing’s interests and policies, i.e., the political nature of outbound capital flows. Finally, as China continues to press forward with its Belt and Road Initiative (BRI), an initiative now elevated to constitutional rank within the Chinese Communist Party in fall 2017, Europe can also expect to see an increasing number of related Chinese investments.

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