In 2026, the threshold for Chinese capital entering Europe rose markedly. None of the instruments that raised it closes the market. All of them, however, raise the bar an investor must clear.
2 October 2026 is the deadline by which the European Commission must decide on the proposed acquisition of Germany’s Ceconomy, the owner of MediaMarkt and Saturn, by China’s JD.com. The transaction, valued at approximately $2.5 billion, is the first in-depth merger investigation involving a Chinese acquirer under the Foreign Subsidies Regulation (FSR). The Commission opened the investigation on 28 May. In July, according to Reuters, it issued formal objections, and on 20 August JD.com submitted proposed remedies, the details of which have not been disclosed.
The timing has another dimension. Trade Commissioner Maroš Šefčovič has said that he wants to see “tangible results” from the new trade and investment consultation mechanism with China before October. The two tracks, political and enforcement, will therefore converge in the same month and together reveal where the new threshold for entry is being set in practice.
For companies and their advisers, this is a more useful framework than the media shorthand of “EU versus China.” Europe is not retreating from Chinese capital. It is changing what investors must demonstrate in order to bring it in.
The Numbers Point in the Opposite Direction to the Narrative
Chinese foreign direct investment in Europe reached €16.8 billion in 2025, up 67% from the previous year and the highest level since 2018, according to the annual analysis by Rhodium Group and MERICS. The report defines “Europe” as the EU-27 plus the United Kingdom. Europe accounted for nearly one quarter of global Chinese FDI, compared with 17% a year earlier.
Both routes expanded. Mergers and acquisitions reached €7.9 billion, an increase of 89%, while greenfield investment rose 51% to a record €8.9 billion, driven primarily by electric vehicle battery plants. The automotive sector accounted for €7.6 billion, or 45% of the total, with 93% of that amount linked to the EV supply chain. Hungary remained the largest recipient at €3.9 billion, followed by Germany at €2.5 billion and France at €1.9 billion. The share captured by the EU’s two largest economies increased significantly.
One indicator, however, tempers this optimistic picture and deserves particular attention: the value of newly announced projects fell to €5.2 billion, compared with €16.9 billion in 2023. The record level of investment completed in 2025 largely reflects decisions made earlier. The pipeline of new decisions is thinner, and it is this pipeline that will now encounter the new terms of entry.
The Consultation Mechanism: Dialogue, Not a Thaw
On 29 June 2026 in Brussels, Chinese Commerce Minister Wang Wentao and Šefčovič announced the launch of a trade and investment consultation mechanism. It covers four areas: trade and investment balance, export controls, intellectual property and WTO reform. It also includes a joint mechanism for monitoring trade flows through data sharing. The next ministerial meeting is scheduled to take place in China in autumn 2026.
At the June meeting, both sides exchanged lists of market access concerns. This is an important procedural detail. The mechanism is transactional by design; it deals with specific issues, not declarations. Šefčovič spoke explicitly about “beginning to rebalance the trade relationship,” while Wang Wentao called for restraint and the avoidance of further escalation.
What the mechanism does not do is suspend any EU instrument. FSR investigations continue, while investment screening is becoming more stringent on a separate track. The consultations provide a channel for managing friction, not dismantling it. A company that interprets the June opening as a sign of a thaw and structures a transaction under the old rules will have misread the market.
Three Layers of the New Threshold
Subsidies. The FSR has applied since 2023, but 2026 has shown what its use against a Chinese acquirer looks like in practice. In the JD.com case, the Commission is examining preferential financing, tax benefits, grants and other financial contributions received during the three years preceding the announcement of the transaction. The objections concern two mechanisms: the release of resources that may have strengthened the buyer’s bidding position and discouraged competing offers, and the enhancement of the capabilities contributed to the combined entity. In other words, the assessment is not limited to the purchase price. It extends to the financing history of the parent company.
Investment screening. On 19 May, the European Parliament adopted the revised regulation on the screening of foreign direct investment, followed by the Council on 8 June. Regulation (EU) 2026/1386 was published on 26 June. It entered into force on 16 July 2026 and will generally apply from 17 January 2028. The change is qualitative. All 27 Member States will be required to operate screening mechanisms covering a common minimum range of sensitive sectors and technologies. These include dual-use items and defence technologies, semiconductors, quantum technologies, specified applications of artificial intelligence, critical raw materials, critical transport, energy and digital infrastructure, specified elements of financial infrastructure, and electoral systems.
The regulation also closes the so-called Xella loophole by covering investments made through EU companies that are ultimately controlled by a non-EU investor. In its opinion, the Commission may propose mitigating measures, including changes to the governance structure, restrictions on voting rights, limits on access to technology and requirements to store specified data within the EU. The Member State concerned, however, takes the final decision and imposes any conditions. By 17 January 2028, Member States must bring their screening mechanisms into line with the common minimum EU standard. This means that the transition period is happening now, not at some point in the future.
The Chinese response. On 13 April 2026, State Council Regulation No. 835 on countering the improper extraterritorial exercise of jurisdiction by foreign states entered into force. The measure empowers the Ministry of Justice to issue orders prohibiting entities and individuals from complying with specified foreign measures. Non-compliance may result in restrictions relating to public procurement, imports and exports, and data transfers, as well as financial penalties and inclusion on a “list of entities acting in bad faith.”
The instrument has not remained on paper. In May, Chinese ministries applied it in connection with the FSR investigation concerning Nuctech. On 19 August, they applied it to the JD.com case, characterising the Commission’s cross-border investigative measures as an unlawful exercise of extraterritorial jurisdiction and prohibiting cooperation with them. Beijing called on the EU to “correct its wrongful practices” and announced that further action could follow.
The Compliance Squeeze
The most practical consequence of the year’s developments emerges from this combination. A Chinese company pursuing a transaction in Europe may now find itself caught between an obligation to provide financial documentation to the Commission and a Chinese prohibition on providing it. Both rules are binding. Both carry sanctions. Neither provides an exception because of the other.
This is not a political risk that can be summarised on a slide about the regulatory environment. It is an operational risk that affects the transaction timetable, structure and contractual terms. It changes how clauses on regulatory cooperation, conditions precedent and the allocation of costs arising from an extended review should be drafted. It also changes how the seller allocates the risk that the buyer may lack not the willingness, but the legal ability, to respond.
It is worth noting that JD.com has not withdrawn from the transaction. It has offered commitments. This is market behaviour, not political positioning, and it captures the direction of the entire category: the cost of entry is rising, but entry remains possible.
What Has Actually Changed for Advisers
The entry of Chinese capital into the European market is no longer a matter of corporate law with an antitrust component. It has become a multi-track process in which the longest path is now determined not by competition law, but by the review of financing history and sectoral classification.
In practical terms, this has several consequences. A three-year subsidy review must begin before signing, not after notification, because the Chinese parent company’s financial documentation is usually dispersed across administrative levels unfamiliar to the European team. Sectoral classification requires checking the new mandatory list rather than relying solely on the rules of the current national regime, as the difference between the two will disappear during the lifetime of many transactions now under negotiation. Structuring an investment through an EU company no longer automatically takes the transaction outside the scope of screening if ultimate control rests with a non-EU investor. The risk of conflicting jurisdictional obligations must also be priced and allocated in the agreement rather than assumed not to arise.
Good documentation does not guarantee clearance, but its absence can increasingly turn a transaction into a lengthy and costly proceeding.
The autumn ministerial meeting and the October decision in the Ceconomy case will provide the first meaningful indication of where the threshold has been set. Until then, the safer assumption is that it is higher than previous practice would suggest.
EnterChina helps European B2B service providers become visible to Chinese companies operating in Europe. We run Xijinmenhu (西进门户), a Chinese-language platform where European law firms, tax advisory firms, compliance and logistics providers, and other specialists present their services to a Chinese business audience.
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