Hong Kong Economic Times (HKET), the leading financial daily in Hong Kong, recently reported that China’s foreign direct investment (FDI) in Europe last year was only 6.8 billion euros, 300 million euros less than the previous year and the lowest figure seen since 2010.
The peak of China’s FDI in Europe (the 27 EU countries and UK) was 47.5 billion euros in 2016. Direct investments have been on the decline since then. Before the COVID-19 pandemic, Chinese FDI numbers reached 14.2 billion euros, and last year’s 6.8 billion euros in FDI were only about 14 percent of the peak value from 2016.
In the past, Chinese foreign direct investment was concentrated in the UK, France and Germany, referred to in China as “the Big Three.” In the past two years, however, Hungary has adopted a pro-China stance while Chinese direct investment in Hungary has substantially increased. Hungary became the largest destination of Chinese FDI funds last year, accounting for 44.1 percent of Chinese foreign direct investment.
Electric vehicles and their supply chains have become the most important Chinese foreign direct investments, accounting for 41 percent of China’s total FDI in Europe in 2022 and rising to 69 percent in 2023.
The decline in China’s direct investment in Europe will be partially counteracted by electric vehicle-related investment, though any near-term rebound in FDI may be insignificant. Affected by factors such as the weakening finances of Chinese companies, increased controls on Chinese investments by European countries, and tensions in China-EU trade relations, Chinese foreign direct investment in Europe is expected to continue to be sluggish.
Source: HKET, June 6, 2024
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