The sharp increase in Chinese ODI in Europe over the past two years has been driven by weak domestic demand in China, and as the country's exporters look for ways to circumvent high U.S. tariffs, said Zhu Tian, Vice President of CEIBS, a higher education institution jointly founded by the Chinese government and the European Union in 1994. But new regulation issued by State Council on outbound investment, set to take effect in July, imposes strict rules on the outbound transfer of technology, data, and resources alongside investment, he noted, adding that this will particularly affect high-end manufacturing.

The new Chinese restrictions come as the EU debates possible tough trade action to restrict subsidised Chinese imports, though Zhu said that a full-blown trade war is unlikely given the scale of trade and industrial linkages. (See MNI: EU Action On China Would Cut Off Key_ Supplies - Advisor)

China should take the EU's concerns seriously, said Zhu, adding Beijing should consider fully opening up some areas in which it has competitive advantages, for example dropping tariffs on imports of electric vehicles to zero to ease bilateral frictions and enhance mutual trust. Foreign enterprises could also be given equal opportunities to compete for government procurement contracts, outside areas involving national security, he said.

Chinese outbound direct investment in Europe, including the EU and the UK, totaled EUR16.8 billion in 2025, jumping 67% year-on-year and the highest since 2018, according to Rhodium Group. Investment in the new energy vehicle and battery sectors reached a record high of EUR8.9 billion, and Europe has become the region with the highest Chinese investment among advanced economies. (See MNI INTERVIEW: UK FDI To China To Buck Wider Slowdown)

China's ODI to GDP is likely to peak at about 2% over the longer run, given concerns that excessive outflows could hurt the domestic economy, said Zhu, also an economics professor at CEIBS where his EMBA course attracts many entrepreneurs. China's flow of ODI as a share of GDP was 0.92% in 2024, down from an earlier peak of 1.89% in 2016, according to Organisation for Economic Co-operation and Development data.

Source｜MNI

Author: Zhu Tian, Vice President of CEIBS