Same Rules, Different Outcomes: Member-State Politics and EU Regulation of Chinese Investment

Abstract

Since the late 2010s the European Union has assembled an expanding toolkit for regulating foreign investment, including the FDI Screening Regulation, the Foreign Subsidies Regulation and countervailing duties on battery electric vehicles from China. This article examines how that toolkit affects Chinese enterprises, whose investment in Europe rose by 67 per cent in 2025 and whose profile—pervasive state links, concentration in strategic manufacturing sectors and complex holding structures—places them at the centre of EU scrutiny. Drawing on investment data, EU legal instruments and case evidence, the article advances three arguments. First, European protectionism differs from its American counterpart in relying on regulation rather than tariffs, a choice rooted in Europe’s economic malaise and in the shift from complementarity to homogeneous competition with China. Second, because implementation rests largely with member states, domestic politics—including populist mobilisation and changes of government—shape how stringently common rules are applied; Hungary’s 2026 change of government shows how quickly a perceived gateway for Chinese capital can tighten. Third, the effects on Chinese firms operate through four mechanisms: higher entry thresholds, rising compliance costs, a shift from acquisitions towards greenfield and joint-venture investment, and relocation across member states. Chinese investment is increasingly concentrated in precisely the sectors where scrutiny is strongest. The article concludes with implications for firms, Chinese policymakers and China–EU economic dialogue, including the case for reviving the Comprehensive Agreement on Investment.