Chinese Investment in the EU: Building a More Resilient Deal Strategy
-
October 30, 2026
-
The relationship between competition policy and industrial policy has become an increasingly prominent topic of debate in Europe. On the one hand, the European Union (“EU”) seeks to prevent excessive market concentration. On the other, policymakers are considering how EU companies can achieve sufficient scale to compete globally in sectors such as artificial intelligence, semiconductors, energy, clean technology and defense.
The draft revised Merger Guidelines published in April 2026 clearly reflects this balancing exercise: Provided effective competition is preserved, mergers that generate pro-competitive scale efficiencies, support research and development and innovation, secure supplies of critical inputs or strengthen resilience within the internal market may generate positive effects.1 At the same time, greater scale is not in itself a reason to approve a transaction; any such benefits must still be assessed within the competition analysis required under EU merger control. Stated more broadly, transactions that raise limited competition concerns may nevertheless become politically contentious where they intersect with wider geopolitical, economic security or industrial policy concerns.
For Chinese investors, the issue should not be reduced to the abstract question of whether the EU welcomes Chinese investment. The EU continues to state publicly that it remains open to foreign investment, and the revised foreign direct investment (“FDI”) regulation itself also makes clear that foreign investment is welcome and that investment screening should balance security and public order considerations with the maintenance of an open investment environment.2
That openness, however, is accompanied more frequently by closer scrutiny. Who is the investor, and what is its ultimate ownership structure? How is the transaction financed? Does it involve sensitive technologies, critical infrastructure or strategic supply chains? What degree of governance or decision-making influence will the investor acquire? Could the transaction create security or supply-related risks?
In other words, cross-border transactions involving the EU need to address not only whether a deal can be completed, but also what investment and governance structure will be used, which assets are involved and how the business will operate after closing. This means that two transactions of the same size may face very different regulatory risks. The sector and nature of the assets, investor structure, financing arrangements, governance rights and the Member State in which the transaction takes place can all materially affect the regulatory pathway. This is where transaction strategy needs to start: while the deal is still being shaped.
How Should Companies Adapt Their Transaction Strategies?
Legal, compliance and transaction teams must anticipate how a deal may be viewed by regulators and stakeholders from the outset, so risks can be addressed before they affect timing, certainty or strategic value.
Bring regulatory risk analysis forward into the transaction strategy stage. When identifying a target and designing the transaction structure, companies should conduct antitrust, EU Foreign Subsidies Regulation (“FSR”) and , FDI as well as broader economic security risk assessments, in parallel, rather than waiting until transaction documents have been signed to address approval requirements one by one. For sensitive sectors, policy and stakeholder risks should also be assessed alongside commercial, financial and legal due diligence.
Build a reliable database of foreign financial contributions. Companies should identify in advance relevant financing, guarantees, tax arrangements and other contributions received across the group during the preceding three years that may fall within the FSR definition of foreign financial contributions.3 The objective is not to assume that such arrangements constitute foreign subsidies, but to ensure that the company can accurately and comprehensively identify and explain their nature, commercial terms and transaction context.
Reassess minority investments and governance structures. Reducing the percentage of equity acquired does not necessarily eliminate FDI screening risk. Companies should review voting rights, contractual rights, board representation and other arrangements that may create material influence over management, and assess these together with the sensitivity of the target assets.
Proactively develop a complete and credible commercial and policy narrative for the transaction. For transactions likely to raise economic security concerns, companies should be able to clearly explain the commercial rationale, financing structure and post-closing governance arrangements. Where appropriate, they may also explain the investment’s contribution to local employment, innovation, research and development, supply chain stability and long-term operations. Importantly, these considerations are not necessarily formal legal criteria under EU merger control or FDI screening. The role of this information is to help regulators, policymakers and other relevant stakeholders understand the commercial rationale and real-world impact of the transaction, rather than substitute a public affairs narrative for legal analysis.
Plan ahead for cross-border compliance in information disclosure. Chinese companies in particular should establish information review mechanisms between their teams in China and Europe at an early stage. When responding to information requests from EU regulators, they should simultaneously assess whether Chinese rules concerning data, state secrets, personal information, technology exports, export controls and judicial assistance apply to the materials and information concerned.
Build geopolitical and economic security risks into transaction documents and timelines. Transaction parties need to take a realistic view of regulatory review periods, conditions precedent, the long-stop date, potential remedies and the allocation of risk under different regulatory outcomes. When a transaction involves sensitive sectors, complex financing structures or multiple jurisdictions, alternative scenarios should be developed in advance.
From Securing Approval to Building Deal Resilience
Cross-border M&A is entering a more complex phase. Antitrust review remains a core part of the regulatory framework for transactions, but it can no longer by itself explain the full range of regulatory risks a cross-border transaction may face. Foreign subsidies review, investment security screening and policy developments related to supply chain resilience, critical technologies and economic security now increasingly operate alongside traditional merger control.
For Chinese companies, this does not mean that the EU market is simply closing. The more important change is that companies need to take a more systematic view of the legal and policy environment surrounding a proposed transaction and, at the transaction design stage, pay greater attention to investor and financing structures, governance arrangements, the sensitivity of target assets and relevant cross-border compliance requirements.
This also requires general counsel to take on a more strategic role: not only assessing whether a transaction can legally be completed, but also helping management understand the different regulatory pathways a transaction may face, how those pathways may be affected by the broader economic security environment and how uncertainty can be reduced from the outset.
A resilient transaction strategy is not one that waits for regulatory issues to emerge and addresses them one by one. It is one that incorporates legal, policy, geopolitical and stakeholder considerations into a single decision-making framework from the earliest stages of the transaction.
FTI Consulting experts work alongside management teams and legal advisors to help companies assess the policy and regulatory environment for cross-border transactions, conduct stakeholder analysis, develop scenarios, position transactions, support government engagement and coordinate across markets. This integrated approach helps companies identify risks beyond traditional antitrust review earlier, make more informed strategic decisions and strengthen deal certainty in a complex policy environment.
Read part one, “Chinese Investment in the EU: A New Era of Scrutiny,” and part two, “Chinese Investment in the EU: Managing FSR and FDI Risk,” to learn more about the EU’s changing transaction landscape and how to navigate new regulations.
Footnotes:
1: European Commission, “Review of the Merger Guidelines,” Competition Policy (n.d.).
2: European Union, “Regulation (EU) 2026/1386 of the European Parliament and of the Council of 17 June 2026 on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452,” Official Journal of the European Union (26 June 2026).
3: European Commission, “Questions and Answers,” Competition Policy (n.d.).
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.
Related Insights
Published
October 30, 2026
Key Contacts
Managing Director, Head of Brussels Competition
Managing Director
Managing Director
Senior Director
Director