The European Union is preparing to tighten its foreign investment framework in an effort to prevent Chinese companies from exploiting the bloc’s open market without delivering benefits to European workers, industries, or technological capacity. The planned revisions form part of a broader set of proposals the European Commission will unveil next month aimed at strengthening Europe’s industrial base and addressing stagnant economic growth.
Concerns Over Chinese Market Influence
The move comes amid growing European concern over:
- A surge of low-cost Chinese imports, accelerated indirectly by US tariffs on Chinese goods under President Donald Trump.
- Increasing Chinese industrial projects within Europe, which EU officials fear could deepen dependence on Beijing for high-end manufacturing capabilities.
- Potential circumvention of future EU tariffs through Chinese companies operating directly inside the bloc.
Brussels is particularly wary that these investments may offer Beijing long-term geopolitical leverage — an idea openly aligned with Chinese President Xi Jinping’s strategic objectives.
New Requirements for Foreign Investors
Stéphane Séjourné, the EU’s industry commissioner, told the Financial Times that forthcoming amendments to investment rules would require foreign companies to actively contribute to the European economy.
He said the updated framework would aim to ensure foreign-funded projects do more than assembly work before shipping products back to China, stating that investments must support “the functioning of the whole European value chain.”
Key expected changes include:
- Mandatory recruitment of local workers
- Technology transfer requirements in selected sectors, including batteries
- Stricter definitions of ‘local content’ to prevent loopholes
Séjourné emphasised that while the EU shares the same re-industrialisation goals as the Trump administration, it intends to use tools other than tariffs, such as conditionality on foreign direct investment.
An EU official noted that China will not be mentioned explicitly in the legislation, but its dominant role in incoming investment makes the target clear.
Sharp Rise in Chinese Investments
Foreign direct investment from China into the EU rose 80% in 2024, reaching €9.4bn, according to Commission data.
Among the most prominent actors is CATL, the world’s largest electric vehicle battery manufacturer. The company:
- Opened a major battery plant in Germany
- Is constructing a €7bn factory in Hungary
- Is building a €4bn facility in Spain through a joint venture with Stellantis
However, concerns persist about limited technology sharing and requests by CATL to bring 2,000 Chinese workers to support the Spanish project’s construction phase.
Support for Stricter Rules
Spain has publicly backed the Commission’s approach, arguing that tighter investment conditions will protect Europe’s economic resilience and ensure foreign investment generates domestic employment and technological value.
In hydrogen energy development — another strategic sector — Chinese involvement has grown significantly. Yet, industry groups warn that existing EU rules limiting reliance on Chinese components are easy to bypass due to opaque supply chains.
Preventing a Regulatory “Race to the Bottom”
Analysts argue the updated rules could prevent EU member states — particularly in southern, central, and eastern Europe — from competing for investment by offering minimal regulatory oversight. This, they say, will help maintain fair standards across the bloc.
The revised rules are likely to affect not only Chinese firms but also Japanese and South Korean companies, though EU officials believe those investors generally have stronger existing partnerships with local industry and would more easily meet EU requirements.
Next Steps
The European Commission is expected to present the official proposal on December 10, though further revisions remain possible. The Chinese Ministry of Foreign Affairs has not yet commented on the plans.
