In the News Teaching Activity – which industries and countries in Europe are attracting the most Chinese inward FDI? (June 2024)

MERICS explores the pattern of Chinese foreign direct investment (FDI) here. The report finds China’s greenfield investment in electric vehicles has become most important, with much concentrated in Hungary.

With relations between China and Europe becoming frostier since the 2010s, Chinese FDI into Europe has fallen back to 6.8bn euros, previously last that low in 2010. However, China has considerably upped its investment in EV battery plants. Hungary, in particular, has benefited from these investment inflows, receiving 44% of the total. Chinese investment is not just in batteries, but also in industries that produce anodes and cathodes which supply the new and expanding battery manufacturers. The medical devices and healthcare industries have also attracted Chinese FDI along with more traditional destinations such as consumer products and ICT. Europe has become more cautious about welcoming Chinese investment in recent years, especially in strategic industries; in the UK, a proposed Chinese investment in semi-conductors was blocked and one the aerospace industry was only accepted under some strict conditions.

Dwindling investments become more concentrated - Chinese FDI in Europe: 2023 Update | Merics

1 Using the bar chart in Section 1.1 of the MERICS report, calculate the percentage change in Chinese investment in Europe between 2016 and 2023.

2 Discuss the likely impact of Chinese FDI on the economy of Hungary. Use an AD-AS diagram to support your ideas.

3 Using the information in Section 3 of the report, discuss why Europe has been screening investment from China more tightly.