Core Viewpoint - The European Union's foreign direct investment (FDI) review mechanism is evolving, reflecting a shift towards strategic considerations over purely economic ones, with a notable increase in scrutiny of investments from third countries [4][14]. FDI Growth and Trends - The EU's FDI stock grew by 7.5% from 2023 to 2024, with foreign merger and acquisition transactions increasing by 10% and greenfield investments rising by 6% [3][7]. - Since 2015, the EU has seen a consistent annual increase in FDI, averaging nearly 5,250 transactions per year [7]. - In 2024, the US emerged as the largest foreign investor in the EU, accounting for 30% of merger transactions and 37% of greenfield investments, despite a 17% decline in greenfield investments compared to the previous year [7][8]. Country-Specific Insights - Germany and France were the primary destinations for foreign mergers, with Germany experiencing a 17% increase in transaction volume, while France saw a slight decline of 1.1% [8]. - Spain and Germany led in greenfield investments, capturing 24% and 12% of total projects, respectively [9]. Sector Analysis - The manufacturing sector dominated foreign merger transactions in 2024, representing 27% of the total, followed by information and communication technology (ICT) at 24% [9]. FDI Review Mechanism Developments - In 2024, EU member states submitted 477 foreign investment cases for review, with 92% processed within two weeks [12]. - The EU is proposing legislative changes to enhance the FDI review framework, aiming for mandatory establishment of national review mechanisms and minimum coordination among member states [12][13]. Strategic Implications - The proposed changes may lead to stricter investment scrutiny for Chinese investors, particularly in critical technology sectors like semiconductors and aerospace [14]. - The shift towards a more coordinated and stringent review process may conflict with the EU's foundational principles of economic liberalism [14].

Group 1 - As of the end of 2024, 24 out of 27 EU member states have established and implemented foreign investment review laws, reflecting a growing concern over potential risks from third-country investments [1][6] - The European Commission's report indicates a 7.5% growth in EU foreign direct investment (FDI) stock from 2023 to 2024, with a cumulative increase of 15% in investment applications since the FDI review mechanism began operating in 2021 [1][3] - The report highlights that the number of foreign mergers and acquisitions in the EU increased by 10% in 2024, with the U.S. being the largest foreign investor, accounting for 30% of merger transactions and 37% of greenfield investments [3][4] Group 2 - Germany and France are the primary destinations for foreign mergers and acquisitions in 2024, with Germany experiencing a 17% increase in transaction volume, while France saw a slight decline of 1.1% [4][6] - The manufacturing sector remains the dominant area for foreign acquisitions, representing 27% of transactions, followed by information and communication technology (ICT) at 24% [4][6] - The European Commission's proposed revisions to the FDI review regulation aim to enforce mandatory foreign investment review mechanisms across member states and promote minimum coordination of review laws [6][7] Group 3 - The report indicates that 477 foreign investment cases were submitted to the cooperation mechanism in 2024, with 92% of cases being resolved within two weeks [6][8] - The proposed legislative changes could lead to stricter investment review standards for Chinese investors, potentially impacting EU-China economic cooperation [8][9] - The shift towards a more coordinated FDI review process reflects a departure from the EU's original liberal economic principles, aligning more closely with U.S. practices [9]