China’s investment in Europe last year fell to the lowest in 13 years 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 only 6.8 billion euros ($7.35 billion), 300 million euros ($3.24 billion) less than the previous year, setting a new low in 13 years since 2010, according to the report.
In 2019, prior to the COVID-19 pandemic, investment reached 14.2 billion euros ($15.34 billion), then plummeted to 6.8 billion euros ($7.35 billion) in 2023, less than 15 percent from the peak.
“From this [investment] figure, we can certainly see that China’s economic situation is very bad,” said Cheng Cheng-ping, a professor at Taiwan’s National Yunlin University of Science and Technology.
“Since 2023 China’s economy has taken a turn to the worse. Although the official GDP 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. The domestic economy is not good, so its power to expand overseas is limited,” he told The Epoch Times.
In 2023, 69 percent of China’s investment in Europe went into the electric vehicle (EV) sector, according to the new report, which is a significant jump from 41 percent in 2022.
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.
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, said the report.
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.
Geopolitical Factors
China’s investment in Europe is also declining due to geopolitical security, Mr. Wang said. “Europe and the United States are now strengthening national security review of foreign investment. 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.
As of now, “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. Therefore, under this situation, more and more economic and trade disputes will continue [between China and the West],” Mr. Wang said.
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.”
