China’s Investment in Europe Drops to Lowest Level Since 2010: Report

CATL, a Chinese electric battery maker, displays its wares at the 2019 IAA Frankfurt Auto Show in Frankfurt am Main, Germany, on Sept. 11, 2019. Sean Gallup/Getty Images

China’s investment in Europe last year fell to the lowest since 2010, according to an annual report published on June 6 by Rhodium Group and German think tank Mercator Institute for China Studies.

China’s direct investment in Europe in 2023 was 6.8 billion euros ($7.35 billion). That’s 300 million euros ($3.24 billion) less than the previous year, setting a new low for the 13 years since 2010, according to the report.

The report shows that China’s direct investment in Europe, specifically the 27 European Union (EU) countries and the United Kingdom, peaked at 47.5 billion euros ($51.3 billion) in 2016, and has declined since.

In 2019, before the COVID-19 pandemic, investment reached 14.2 billion euros ($15.34 billion). It then tumbled in 2023 to less than 15 percent of the peak.

“From this [investment] figure, we can certainly see that China’s economic situation is very bad,” Cheng Cheng-ping, a professor at Taiwan’s National Yunlin University of Science and Technology, said.

“Since 2023, China’s economy has taken a turn to the worse. Although the official GDP [gross domestic product] growth rate is about 5 percent, the real situation is very bad, and its export situation is also very bad, so its total foreign investment is also declining,” Mr. Cheng told The Epoch Times on June 8.

Wang Guo-chen, an assistant researcher at the Chung-Hua Institution for Economic Research in Taiwan, made a similar assessment.

“China’s finances are tight now and the government has huge deficits, so most of the money from its overseas state-owned enterprises is remitted back to mainland China,” he told The Epoch Times. “The domestic economy is not good, so its power to expand overseas is limited.”

In 2023, 69 percent of China’s investment in Europe went into the electric vehicle (EV) sector, a significant jump from 41 percent in 2022, according to the report.

Meanwhile, the EU–China trade dispute over cheap Chinese EVs flooding the European market has intensified. The EU started conducting an investigation into Chinese EVs subsidized by the Chinese communist regime in October 2023, and has been contemplating imposing tariffs on them.

“The most important industry in Europe is the automobile. China’s electric vehicle subsidies and massive dumping will definitely cause trade disputes between China and Europe,” Mr. Wang said. He doesn’t see Europe backing down from its position.

Hungary Is Top Chinese FDI Destination in Europe

Forty-four percent of China’s total foreign direct investment (FDI) in Europe went to Hungary in 2023, up from 21.3 percent in 2022. The surge is mainly driven by investments in EV battery plants by CATL and Huayou Cobalt, which are worth 8.7 billion euros ($9.4 billion) in total, the report noted.

A BYD ATTO 3 electric sports utility vehicle is charged while on display at a BYD dealership in Yokohama, Japan, on April 4, 2023. Eugene Hoshiko /AP Photo

China’s EV giant BYD has announced plans to set up a factory in Hungary to manufacture EVs in 2026. Hungary attracted more Chinese FDI in 2023 than the “Big Three”—France, Germany, and the UK—combined, which totals 35 percent, according to the report.

Because China is strapped for funds, “it concentrates its money on investing in more ‘friendly countries,’” Mr. Wang said.

Mr. Cheng said the Orbán government in Hungary is very “pro-Russian and pro-China.”

“Therefore, China has established the largest factory in Hungary for both EVs and EV batteries. In this way, it can avoid the impact of the trade war between China and Europe in the future,” he said.

(L–R) Chinese Premier Li Keqiang, Hungarian Prime Minister Viktor Orbán, and Bulgarian Premier Boyko Borisov speak during an economic forum in Budapest attended by 16 central and eastern European leaders on Nov. 27, 2017. Attila Kisbenedek/AFP/Getty Images

“You can see that [China’s] trade and investment in Western Europe continues to plummet, but in Central and Eastern Europe, there are still many loopholes,” Mr. Cheng said.

Geopolitical Factors

China’s investment in Europe is also declining because of geopolitical security, Mr. Wang said.

“Europe and the United States are now strengthening national security review of foreign investment,” he said. “This has been the trend in recent years, and it is becoming more and more strict.”

He said China’s investment in Europe has been hampered since May 2021 when the European Parliament froze the EU–China Comprehensive Agreement on Investment.

“In terms of economy, the issues between China and the United States or China and Europe are no longer considered mere economic disputes, but involve more economic security,” Mr. Wang said. “Therefore, under this situation, more and more economic and trade disputes will continue [between China and the West].”

Electric cars for export waiting to be loaded on the "BYD Explorer No.1," a domestically manufactured vessel intended to export Chinese automobiles, at the port of Yantai, in Shandong Province, on Jan. 10, 2024. STR/AFP via Getty Images

Mr. Cheng noted that the EU has realized that the Chinese communist regime is the main force supporting Russia since its invasion of Ukraine in 2022.

“So from 2023 onwards, it’s actually been the whole of Europe against China, whether it is called decoupling or de-risking, they are basically slowly moving closer to the United States. If the war expands to Europe, the main reason is because China is supporting Russia from behind.”

He added: “Looking forward to the future, basically, the trade between China and Europe, which obviously declined in 2023, will continue its downward trend. China’s investment in Europe will continue to significantly decrease as well.”

Luo Ya and Li Su contributed to this report.