Chinese heavyweight investors in Europe are busy restructuring investment portfolios and fuelling collaborations with European partners so that businesses are aligned with the Continent’s green policies, according to several dealmakers.

European exits by Chinese firms currently total USD 784.74m via eight deals in 1Q25, up from USD 353.08m across seven deals in 1Q24, according to Mergermarket data.

Advisors for China-Europe desks are receiving an increasing number of requests from Chinese corporate clients to review those European assets with shrinking profit margins, including disposing of non-core and financially underperforming businesses, or asset-heavy infrastructure facilities that could face regulatory hurdles, like ports, harbours and telecoms-related assets.

Profit-margin squeezes have been driven by high inflation, sluggish demand, tightened reviews/caution over China’s capital inflows, and political uncertainty in the bloc.

Petroleum-reliant and high-polluting assets, such as chemicals companies, have also been on disposal menus, following the energy price surge arising the Russia-Ukraine war.

Such asset disposals could help Chinese firms replenish war chests for their cash-strained core businesses in home markets, as well as invest in Belt & Road regions – China-friendly countries experiencing growing demand.

The latest example of a Chinese group carving out European assets came on 26 February, when auto parts manufacturer Ningbo Huaxiang Electronic [SHE:002048] announced that its subsidiary, Ningbo Lawrence Automotive Interiors, had sold European automotive interiors company NBHX Trim Europe to Germany-based private-equity (PE) player Mutares.

The Chinese listco’s move was driven primarily by the asset’s ongoing losses, debts nearing maturity, as well as the rising cost of local operations, and compliance with environmental and labour regulations, Huaxiang Electronic’s investor relations manager, Mengmeng Chen, told Mergermarket.

“We would like to cash out to repatriate for domestic assets with high growth potential in our core space [automotive electronics], including Chinese assets carved out by multinational corporations,” says Chen. “We have no plans to exit Europe, but just to run lighter.”

Another Chinese company following this trend is automaker Great Wall Motor (GWM) [HKG:2333; SHA:601633]. Since mid-2024, GMW has been working to dispose of its manufacturing facilities in Europe, as evidenced by its plant sale in Germany last year, along with the closure of its European headquarters in Munich last August, says a banker who advised on the deal. Such moves are in line with the automaker’s efforts to operate in European markets without physical assets, he added.

European unions

Containing some of the world’s major economies, European markets are a big draw for Chinese companies. They are working to expand industry chains in renewable energy and green technologies, which are highly aligned with the Continent’s long-term economic strategies, while also retaining existing assets in these spaces.

Just as European countries need Chinese know-how and expertise in such industries, Chinese firms are seeking new growth beyond frenetic domestic competition. It is easier to successfully tap new markets than stand out from over-heated ones at home, where hard-working Chinese players continue to struggle.

Rather than pursuing direct takeovers of local businesses, as they previously did, Chinese companies now tend to look for strategic collaborations. These include joint ventures and technology licensing, among other flexible alternatives that can boost local European industries, and help to lower the regulatory hurdles for Chinese firms into the regions.

Under scrutiny

European regulators are continuing to scrutinise inbound investments by Chinese capitals on the grounds of national security and public order concerns. Investment screening regimes monitoring geographies and sectors are expanding, particularly in those industries deemed to be of ‘strategic importance’.

Currently, the Greek government is examining the potential impact on Piraeus Port, a local container port, as its owner, China Ocean Shipping Company (COSCO), a Chinese state-owned shipping firm, is being investigated by US authorities, as reported by Reuters in January. In 2016, COSCO became the majority shareholder of Greek harbours and ports operator, Piraeus Port Authority [ASE:PPA].

On the other hand, Beijing requires Chinese state-owned enterprises (SOEs) and listcos to clear off their non-core and low-margin assets overseas in a bid to consolidate their overall businesses. The economic slowdown in Europe since the COVID-19 breakout has seen many assets deteriorate financially, pushing SOEs to carve out underperforming businesses.

To that end, Chinese state-owned electronics instrument manufacturer INESA Group is working with its investment arm, Shanghai Feilo Investment, to explore a sale of Europe-focused lighting products company Sylvania Group, advised by BDA Partners, per a Mergermarket report on 16 January. Its core market is in Europe, where it has been racking up losses.

Mergermarket overview of announced deals in 2025 by Chinese companies selling European assets

Source: Mergermarket, data correct as at 12-Mar-25