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According to a recent report by the Mercator Institute for China Studies, Chinese investment into Europe hit a seven-year high in 2025, reaching EUR 16.8 billion. Yet this scale of investment is colliding with a rapidly hardening EU policy stance on trade with China that will structurally restrict how Chinese companies access the European market. While global attention tends to remain fixated on Sino–US trade relations, equally disruptive tensions are brewing with Brussels.
Redefining access to Europe
The European Commission’s approach is more technocratic than bombastic, which helps explain why the issue gets less attention in Chinese boardrooms. But the warning signs have been clear to see in recent months. Commission President Ursula von der Leyen articulated them in direct terms, stating that the EU “cannot and will not absorb China’s export-led growth model, and its industrial overcapacity.” Executive Vice-President Stéphane Séjourné went further, noting “if we do nothing, then it’s quite clear that very soon, 100 per cent of clean technology will be produced in China.”
The Commission’s main lever for putting this policy into practice is EU Member States’ roughly €2.5 trillion in annual public procurement. The specific mechanism it intends to use to pull that lever is the Industrial Accelerator Act (IAA), the draft of which was published in March. It aims to restructure how non-European manufacturers access the European market. Even if the IAA never names China, it targets it through a country-neutral threshold that, in practice, captures Chinese investment in batteries, solar and critical raw materials.
The IAA must still pass through the European Parliament and Council, a process likely to extend beyond 2027. As with the cross-party consensus on China in the US Congress, there is widespread consensus that countering Chinese overcapacityis a core priority for the EU. However, while that end goal might be generally agreed, the specific means to achieve that goal are not uniform either in the European Parliament or in the Member States. That means the IAA’s final form could still change, with likely debate over ownership caps and the breadth of “Made in EU” requirements.
A fragmented European voice
While engagement in Brussels will be important, it is predominantly at the Member State level where the politics will play out. Hungary has become the principal hub for Chinese investment, though Germany, France and Spain are now drawing renewed inflows.
The political landscape is split, driven both by national considerations, as well as each country’s export relationship with China. Germany, for instance, with the deepest exposure to Chinese retaliation through its automotive and chemicals sectors, is among the most cautious about some of the IAA’s legislative proposals. France is pushing the national champion agenda hardest and has been the most consistent advocate for tariffs and procurement restrictions. Spain has shown how fast these positions can shift. It was initially listed among the signatories of a joint paper with France, Italy, the Netherlands and Lithuania, pressing for tougher trade defence instruments, only to step back days later, with Madrid saying it had never formally backed the tougher line as it continues to court Chinese investment. The Netherlands, also a signatory, remains wary of turning an industrial instrument into a tool of economic security, pressing for measures that stay consistent with WTO rules.
The next chapter of the EU-China relations
The IAA is the EU’s most visible legislative instrument, but it does not sit alone. The Foreign Subsidies Regulation, a cybersecurity law update, and a critical raw materials regime are all moving in the same direction, each on different timelines. The Commission is also preparing new trade-defence measures designed to act faster and reach further, with proposals expected later in 2026. But the final terms of each are still in play. The rules of the EU-China economic relationship are being rewritten now, including through the launch of the EU-China Trade and Investment Consultation just recently on 29 June. These rules, once finalised, will hold for the decade to come. The decisive variable is less the rhetoric in Brussels than the fragmentation between Member States, and it is there, in the national capitals as much as in the EU institutions, that the next phase will be settled.