Germany, France and the UK were once the most important destinations for China's direct investment in Europe, but for Chinese companies, these countries have become less significant. Hungary has become the new favorite for China's investment in Europe. This is the result of a study conducted jointly by the German think tank Merics and the American think tank Rhodium Group. The study found that five Chinese companies have brought substantial funds to Europe.

The Hungarian Prime Minister personally discussed investment with Chinese enterprises

The research report released exclusively in advance by the German business newspaper shows that by 2024, the combined share of Germany, France and the UK in China's total investment in Europe will drop to 20%. In the previous five years, this proportion averaged 52%. This brings to mind the emergency legislation passed last month by the British government to ensure control over British Steel, a company held by Chinese capital. Both Germany and France have repeatedly banned Chinese acquisitions of local companies.

Hungary is currently the largest recipient of China's direct investment. Last year, 31% of China's direct investment in Europe flowed into this country. Under the leadership of Prime Minister Viktor Orban, Hungary has adopted a pragmatic policy of cooperation with China, leaning towards a pro-China stance.

The authors of the study attribute this mainly to large-scale greenfield investments, where Chinese companies build new factories in Hungary. The report states that by 2024, four of China's ten most important investments in Europe will be located in Hungary, including three battery plants and one electric vehicle plant. For example, the Chinese company EVE Energy established its first European factory, which will supply batteries to the BMW plant.

A report from the "Handelsblatt"

Official Hungarian data shows that last year, China ranked first among foreign investors with an investment amount of 5.2 billion euros, accounting for approximately 51% of the total investment.

Recently, the Hungarian government signed a strategic cooperation agreement with BYD, a Chinese electric vehicle manufacturer. BYD officially announced the establishment of its European headquarters in Budapest and the creation of a new European R&D center. Orban stated outright that China has become Hungary's largest source of foreign investment multiple times. "This means that Chinese investment has become an important, if not indispensable, engine for Hungary's economic growth."

UK Prime Minister orders the recovery of a Chinese-invested steel mill

If we look at Germany alone, Chinese investors still lead compared to other foreign investors.

According to an analysis report released by the management consulting firm EY in mid-May, in 2024, Chinese enterprises are the source of the most planned projects in Germany. The report shows that Chinese enterprises rank first in the number of investments in Germany for the first time. They announced 96 projects in Germany, surpassing American companies (90 projects) for the first time.

However, this number does not include the actual number of completed projects or the amount of involved funds. Last year, CATL, a Chinese energy storage system manufacturer, canceled plans to build two battery factories in Germany. The reason was the stagnation in sales of electric vehicles in Germany and Europe, as well as the reduction in electric vehicle manufacturing plans by major European automakers.

Chinese acquisition of the Hamburg port in Germany was also obstructed

Other interesting points from the study by Merics and Rhodium Group include:

China's direct investment in Europe is mainly driven by large companies. Battery manufacturer Contemporary Amperex Technology Co. Limited (CATL), video game and communication company Tencent, automobile manufacturer Geely, wind power company Envision, and battery manufacturer Gotion High-Tech account for nearly half of the total investment.

In 2024, China's global direct investment showed its first growth (52 billion euros). In the previous seven years, this figure had been steadily declining.

In Europe and the UK, China's direct investment also showed its first growth since 2016, increasing by 47% compared to 2023.

CATL constructing a factory in Hungary

The research experts attribute the recovery of China's outbound investment to the following three reasons:

Increasingly fierce domestic market competition in China.

Growing tensions in the global market, leading to increasing localization pressure.

Continuously improving global competitiveness of Chinese enterprises, particularly in the clean technology sector.

Chinese enterprises are welcomed in Hungary

However, so far, the largest area of China's direct investment in Europe has been the electric vehicle (EV) industry—and the situation there doesn't look good recently. The study states: "In 2024, the value of newly announced EV projects in China plummeted sharply, and last year, three large EV battery projects were canceled."

For the future, experts believe that China's direct investment may further increase, but they remain skeptical. One thing is certain: Chinese enterprises have transitioned from being chosen to becoming choosers when investing in Europe. Countries friendly to China often benefit from Chinese investment, just like Hungary.

Original article: https://www.toutiao.com/article/7506439873981612582/

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