Report Reveals UK as Preferred European Destination for Chinese Investment
The UK has been the top European destination for Chinese foreign direct investments (FDI) since 2000, but recent years have seen a shift in this trend with a decrease in mergers.
According to a report released on Thursday by consultancy Rhodium Group and German think tank Mercator Institute for China Studies, the UK, Germany, and France were the dominant countries in Europe in attracting FDI from China, with the UK leading the pack.
Between 2000 and 2023, the “Big Three” countries accounted for over half (55 percent) of all Chinese direct investments in Europe.
The UK has garnered 75.6 billion euros (£64.4 billion) in Chinese FDI since 2000, significantly more than Germany’s 33.2 billion euros (£28.3 billion) and France’s 21.9 billion euros (£18.7 billion).
However, recent investments have shifted towards EV projects in central Europe, marking a change in the trend.
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In 2017, the UK attracted approximately half of all Chinese FDIs in Europe. This figure dropped to 29.8 percent in 2022 and 10.3 percent in 2023.
Overall Chinese FDI in Europe has decreased in recent years to 6.8 billion euros (£5.8 billion) in 2023, the lowest level since 2010.
This is a decline from 7.1 billion euros (£6 billion) in 2022 and a peak of 47.5 billion euros (£40.5 billion) in 2016.
The decrease is mainly attributed to a significant drop in mergers and acquisitions (M&A), which previously made up the majority of Chinese investments in Europe.
In 2023, the value of M&A decreased by 58 percent to less than 1.5 billion euros (£1.3 billion).
According to the report, the dominance of EV projects in Chinese FDIs has led to a change in the main destinations for investments in the past two years.
Hungary received 44.1 percent of all Chinese FDIs in Europe in 2023, surpassing the “Big Three,” which accounted for 35.3 percent of Chinese FDIs that year.
This surge in investments was fueled by projects in battery plants by CATL and Huayou Cobalt, totaling 8.7 billion euros (£7.4 billion).
Hungary, along with France and Germany, attracted 88 percent of all EV-related Chinese investments, the report noted.
In addition to greenfield investments, sectors such as healthcare, consumer products, entertainment, and information and communication technology (ICT) have continued to attract Chinese investments, with an average of 3.1 billion euros (£2.6 billion) invested annually between 2021 and 2023.
On the other hand, investments in transport, real estate, and financial and business sectors have seen significant decreases of over 90 percent.
The report pointed out that the healthcare, consumer, and ICT sectors now account for about 70 percent of non-EV-related Chinese FDI in Europe, doubling their share from 2014 to 2023.
The report also highlighted the likelihood of increased scrutiny of Chinese investments in the healthcare sector, citing EU investigations into China’s public procurement of medical devices in April and the European Commission’s recognition of biotech as one of Europe’s top four critical technologies in its economic security strategy.
In the UK, the National Security and Investment Act 2021 has led the government to make approximately two dozen interventions, half of which involved blocking or restricting Chinese acquisitions of British infrastructure or dual-use manufacturers.
