Europe has learned to block Chinese acquisitions of strategic assets. Chinese factories in Europe now pose harder economic security challenges.
Europe has become more alert to the risks posed by Chinese foreign direct investment (FDI) in sensitive technologies. The 2010s were a European garage sale of high-tech firms to China, enabling Chinese investors to acquire intellectual property, know-how and supply-chain leverage. That era is ending. Following a wave of takeovers of semiconductor companies – including Silex, Okmetic, LFoundry and Nexperia – many member-states strengthened their screening mechanisms. Large member-states and the UK have since blocked or unwound numerous Chinese acquisitions, particularly after Beijing supported Russia’s invasion of Ukraine in 2022.
Europe has become more alert to the risks posed by Chinese FDI in sensitive technologies.
The EU has reinforced national action with a tighter FDI screening framework and is preparing legislation to condition certain greenfield investments – where Chinese firms build plants directly in Europe – on technology transfer. Europe is pulling in two directions: restricting Chinese takeovers in high-tech sectors while seeking Chinese capital in areas where it lags, such as batteries. The challenge is to close the remaining loopholes without deterring investment that could strengthen Europe’s industrial base. The EU and the UK must bolster screening capacity, focus on transactions posing genuine security risks, and develop tools to address vulnerabilities stemming from greenfield investment.
A flurry of legislative action
In December 2025, the European Parliament and the Council of Ministers reached a political agreement on tightening the EU’s FDI screening framework. This marks the first substantial overhaul of the regulation, which since 2020 had left screening optional and uneven across member-states.
The agreed changes are significant:
Mandatory screening in all member-states: the updated framework makes previously optional screening mandatory. Bulgaria, Greece and Ireland introduced mechanisms only in 2025, while Croatia and Cyprus are still finalising theirs.
A common set of sectors: member-states must screen investments in defence and dual-use goods, AI, quantum, semiconductors, critical raw materials, critical energy, transport and digital infrastructure, electoral systems and systemic financial market infrastructure.
Closure of the EU-subsidiary loophole: he revision extends screening to investments routed through EU-based entities ultimately controlled by non-EU actors.
Even before the latest clampdown, Chinese FDI in the EU had fallen sharply. But its composition is changing: investment has shifted from mergers and acquisitions (M&A) to greenfield projects, concentrated in the automotive and battery sectors and increasingly directed towards more accommodating member-states such as Hungary.
These dynamics leave two key problems largely untouched. The first is that the updated screening framework still leaves final decisions mostly at national level. The second is that it is designed primarily around M&A, not greenfield investment. M&A deals can transfer sensitive intellectual property or relocate strategic manufacturing, while greenfield projects can create different exposure risks, such as bypassing EU trade defences with limited local value added or employment or embedding security risks.
To address these concerns and help European industry catch up in areas where it lags behind China, the EU is preparing the Industrial Accelerator Act. The aim is to raise manufacturing to at least 20 per cent of EU output by 2030 through requirements that parts of strategic value chains be ‘made in Europe’. A leaked draft would require certain Chinese investments – such as in the electric vehicle supply-chain – to include technology transfer, joint ventures and local employment. But the proposal, reflecting France’s more dirigiste instincts, faces strong resistance from more liberal member-states, including Germany and the Nordic countries. The risk is that Europe has solved yesterday’s China problem – takeovers – but not tomorrow’s: industrial location.
The risk is that Europe has solved yesterday’s China problem – takeovers – but not tomorrow’s: industrial location.
The rise and fall of Chinese investments in European high-tech
Between 2000 and 2023, China’s state banks and official creditors channelled around €138 billion into EU economies. AidData has shown this capital increasingly targeted critical infrastructure, critical minerals and high-tech assets such as semiconductors. Attempted acquisitions were remarkably successful, with an 80 per cent completion rate.
From 2015 to 2018, Chinese buyers acquired a string of strategic semiconductor assets and faced little resistance. This did not represent a random shopping spree but a comprehensive targeting of the entire value chain, spanning intellectual property, tools, wafers, foundries and power chips – in line with the Made in China 2025 industrial policy strategy, which set a goal of 70 per cent self-sufficiency for semiconductors.
At the time, political scrutiny in Europe was relatively minimal and co-ordination across member-states virtually non-existent. The prevailing assumption was that ownership did not matter much as long as plants stayed open and jobs were preserved. For example, Silex in Sweden became a global leader in MEMS – a type of semiconductor with telecommunications, scientific and other applications – in the early 2000s. In 2015, NavTech, a Chinese company, bought Silex in a transaction involving Chinese state funds. Soon after the deal, Silex announced plans to build a plant in China, heightening concern about knowledge transfer and inadvertently supporting Chinese military technology. Similar dynamics were observed in the adjacent machine-building sector, with the most controversial example being the 2017 sale of German high-end industrial robot producer Kuka to China’s Midea Group.
However, this permissive era has largely ended. The risks of China acquiring semiconductor and tech assets in Europe have receded as member-state governments increasingly block takeovers, although there was a spike of smaller deals in 2024 (see Chart 1). A first line of sporadic resistance emerged around 2016–21, often driven by the US cajoling European governments. For example, the 2016 attempt by China’s Fujian Grand Chip to buy German semiconductor equipment maker Aixtron was initially cleared by Berlin, but later derailed after US intelligence agencies raised concerns and the US blocked the acquisition of Aixtron’s US business.