China’s investment in Europe has taken a “green” turn, as they increasingly fund eco-friendly ventures like electric vehicle battery production. In 2022, over half of Chinese investment in Europe was in new projects rather than company takeovers, a trend not seen since 2008. Among the major investors were CATL, Envision AESC, and SVOLT, while Tencent’s purchase of Sumo Digital was the only deal over $1.10 billion.
This shift shows that Chinese companies are now “key players in Europe’s green transition,” says Agatha Kratz from the Rhodium Group. Europe’s strict environmental rules and lagging battery industry have made it a prime destination for Chinese know-how. Building operations in Europe also helps Chinese firms dodge tariffs, transport costs, and political tensions.
Despite increased scrutiny of Chinese investments, Europe remains more welcoming than the United States, which has limited Chinese battery imports. However, European leaders are still debating their relationship with China and searching for ways to strengthen local industries and secure key materials for a greener future.
Q1. Define the term FDI.
Q2. Explain one advantage for Chinese firms of investing in European companies.
Q3. Discuss whether increasing and attracting more FDI is an effective growth strategy for a domestic economy.
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