Chinese foreign direct investment (FDI) in the European Union continued to decline in 2018, mirroring the decline in Chinese investments globally. This was due mainly to continuing capital controls and lower liquidity in China’s financial system. Another contributing factor, however, is the growing political and regulatory backlash against Chinese commercial presence in advanced economies, including new and updated investment screening mechanisms in various EU member states. These are the findings of the joint report “Chinese FDI in Europe: 2018 Trends and impact of new screening policies” by Thilo Hanemann, Agatha Kratz (Rhodium Group) and Mikko Huotari (MERICS).
Fall in Chinese FDI in Europe
In 2018, Chinese firms completed FDI transactions worth EUR 17.3 billion, a decline of 40 percent from 2017 levels and over 50 percent from the 2016 peak of EUR 37 billion. The lion’s share of the investment continued to go to the three biggest economies in Europe: the UK (EUR 4.2 billion), Germany (EUR 2.1 billion) and France (EUR 1.6 billion) received 45 percent of Chinese investment in Europe – down, however, from 71 percent in 2017. All three nations have updated their screening regimes in the last two years. Significant investment in Sweden (EUR 3.4 billion) and Luxemburg (EUR 1.6 billion) contributed to an increase in Northern Europe and the Benelux’ respective weight, to 26 percent and 13 percent respectively, thereby cutting into the share of the “big three”.