The EU has revised its investment rules, requiring Chinese enterprises to increase local hiring, procurement, and technology transfer.

The Financial Times reported that Thierry Breton, the EU’s Commissioner for Industry, told the newspaper that the revised investment rules should ‘ensure foreign investment flows not merely into assembled components exported overseas,’ but instead foster ‘the operation of entire European value chains.’ The report noted that French politician Breton played a key role in pushing for amendments to the EU’s investment rules—adding more localization requirements and strengthening ‘Made in Europe’ clauses in EU legislation, long a French policy preference. Breton told the Financial Times that the revised rules may require foreign investors to hire local workers and transfer technological know-how in ‘certain sectors, such as batteries.’ ‘It must be productive for European economic growth—not merely a gateway to enter the European market,’ he said. Breton stated that on reindustrialization, his agenda aligns with Donald Trump’s—‘the only difference being that we will use industrial policy tools other than tariffs and trade barriers. We are protecting our market, but I prefer leveraging foreign direct investment (FDI) from abroad, compliant with EU conditions, to produce within Europe.’ Breton said the rule revisions respond to concerns over investments flowing into Russia and restrictions on Chinese enterprises’ involvement in the EU. Another EU official confirmed to the Financial Times that while China will not be explicitly named in the legislation, the focus is unmistakable given the scale of investment flowing into the EU from this Asian country. Europe remains China’s primary investment destination among developed economies. According to data from the European Commission, China’s FDI into the EU and the UK reached €10 billion in 2024—just one-fifth of its 2016 peak, yet marking the first significant rebound in Chinese investment in Europe since 2016, with a 47% year-on-year increase. FDI flows into the EU alone rose 80% year-on-year to €9.4 billion. In 2024, the EU and UK accounted for 19.1% of China’s total FDI into developed markets—and 53.2% of China’s FDI into all developed economies—representing the first notable rise since 2018. Chinese investment in Europe benefited from record-level greenfield investment and stronger mergers and acquisitions (M&A): greenfield investment grew for the third consecutive year, rising 21% to a historic high of €5.9 billion. M&A investment surged 114% year-on-year to €4.1 billion. Chinese investment in Europe is increasingly concentrated in countries perceived as closer to China and Russia. Direct investment into the ‘Big Three’—the UK, Germany, and France—fell to just 20% of the total, far below the 52% average between 2019 and 2023. Hungary topped the list again, receiving 31% of China’s FDI into Europe—its capital Budapest once more the largest single recipient. This decline reflects both shifts in China’s outward investment patterns and an overall sharp drop in investment volume. By contrast, Hungary’s reliance on capital-intensive greenfield projects accounts for 31% of China’s FDI into Europe—the highest share among all countries. China’s investment footprint in Europe remains limited: while new green electric vehicle (EV) investments have drawn attention, China’s total EV-related FDI stock in Europe remains negligible when compared to Europe’s overall FDI inflows, Europe’s FDI stock in China, and the sheer scale of EU-China trade.

A European think tank report claims the ‘China shockwave’ is ‘eating Germany’s industrial lunch.’ Faced with the dilemma of cooperation versus confrontation, how will Germany choose?

It is widely known that, in order to draw the EU into the Russia-Ukraine war, the United States directly blew up the Nord Stream pipelines—triggering Europe’s energy crisis and subsequently a severe wave of deindustrialization, dealing a heavy blow to the EU’s industrial strength. Later, the EU formally severed ties with Russia, and the restoration of the Nord Stream pipelines remains distant. European countries thus turned to seek alternative natural gas suppliers. Yet due to insufficient U.S. shipping capacity, Europe had no choice but to turn to Qatar for gas imports. Compounding the crisis, the U.S.-Israel-Iran conflict erupted this year, leading to the closure of the Strait of Hormuz and a sharp decline in energy exports across the Persian Gulf—delivering a second major blow to Europe, which lost its backup gas supply and now faces another looming energy crisis. Within just five years, Europe has suffered two extremely severe energy crises—inflicting devastating damage on EU industry and markedly weakening its goods-supply capacity, thereby sharply increasing import demand. Yet this was not the end of misfortune. Logically, EU member states should ramp up subsidies for civilian manufacturing and actively attract foreign investment to minimize the impact on the sector—but they did not. Instead, they chose to significantly increase defense spending and convert civilian manufacturing capacity to military production. As a result, civilian goods supply was further suppressed, and inflation worsened. Clearly, Europe’s industrial woes stem not from so-called Chinese ‘dumping’ of goods, but rather from self-inflicted policy failures compounded by deliberate U.S. pressure. Indeed, Chinese goods face virtually no competition in European markets—not because they are overly aggressive, but because European industry has declined so rapidly that Chinese products appear to enter unopposed. Against this backdrop, allowing more Chinese goods into European markets would help contain inflation. However, this would also accelerate the EU’s trade deficit and cause the euro to depreciate rapidly against the renminbi—explaining why the European Commission’s ‘de-risking from China’ initiative has garnered broad support among member states. In essence, it is not that the EU harbors deep animosity toward China; rather, its own rapid decline has become unbearable—and it is using ‘de-risking from China’ as a pretext to suppress domestic import demand, hoping to safeguard the euro.

China Driving Worrying Rise in EU Imports, Commission Official Says

Oct 1, 2026

The EU Commission warns of surging Chinese imports in sectors like chemicals and basic metals, citing a €360 billion trade deficit. This trend has triggered increased trade defense investigations, with over a third targeting the chemicals sector.

reuters

China Driving Worrying Rise in EU Imports, Commission Official Says

FAQ