Beyond the challenges: the strength of Sino-European ties

The EU and China have consistently strengthened their relationship across the financial services sector since the 2008-9 financial crisis, according to our joint study Beyond the challenges: the strength of Sino-European ties, conducted by Luxembourg for Finance and PwC Luxembourg.

The report finds that Chinese investment into Europe has boomed from €6.1bn in 2010 to €79bn in 2018, with financial services representing the second largest investment sector. Meanwhile, the volume of EU foreign direct investment (FDI) into China still far exceeds China’s investments into Europe, growing at a compound annual growth rate (CAGR) of 6.7% since 2002, reaching €189.4bn in 2018, with a notable increase in the EU’s FDI allocation to China’s financial and insurance sector.

Our study argues that despite an increasingly challenging diplomatic backdrop between these two economic superpowers, the route to a more productive and stable relationship could be built around urgent shared goals, such as tackling the climate emergency and pandemic recovery, which must be underpinned by free-flowing global capital.

Key Findings


2020 saw China overtake the US as Europe’s largest trading partner. The EU now holds goods trade deficit with China of €164bn. Despite political apprehension, this is not slowing.


Despite a notable decrease of outward M&A from China – with 83% of Chinese M&A deals in the EU expected to be scrutinised – Europe remains China’s M&A region of choice.

Asset & Wealth Management

Bilateral portfolio investment has increased by 10.4% from Europe into China and 9.0% from China into Europe since 2001. European-domiciled investment funds now account for an increasing proportion of inward investment into China, rising from 33.1% to 56.2% between end-2017 and end-2020.


Increased deregulation and liberalisation are opening a similar wealth of cooperative opportunity through China’s vast insurance industry, with total assets seeing a CAGR of 19.5% from 2005 to reach €2.9tn at end-2020. Should this growth trajectory continue at pace, China’s share of global premiums could surpass the US by 2029, totalling around €5.5tn by 2030. There has been a surge of European players, such as AXA and Allianz, entering the Chinese market.


Chinese banking operations in Europe have accelerated post financial crisis, to support Chinese firms as they expand overseas, as well as the increasing internationalisation of the Renminbi. There has been a similar surge of European banks establishing offices in China, including Deutsche Bank, UBS, BNP Paribas and Credit Agricole.

“The world must build back better after the pandemic, and the relationship already established between China and the EU in financial services will be a key factor. While the political overtones are sometimes challenging, there is a need to be pragmatic, and to find a productive way forward. Right now, the need for global cooperation and free flowing capital have never been more critical to tackle the climate emergency.”

Nicolas Mackel, CEO of Luxembourg for Finance

“The data highlighted by the research showcases the evolution of financial integration between China and the EU and emphasises the need for continued cross border collaboration. The recent regulatory developments in China and the strong interest shown by global players in accessing the Chinese market and vice versa strongly suggests that the financial sector represents a veritable opportunity to foster a lucrative, long-lasting financial relationship.”

Dariush Yazdani, Market Research Centre Leader Asset & Wealth Management at PwC Luxembourg

“This increased bilateralism represents a major shift in the global FS landscape and a watershed moment in Sino-European relations. The highly publicised differences between to two economic superpowers notwithstanding, there is a growing wealth of evidence to suggest that their respective financial services industries are strongly compatible and conducive to an increasingly symbiotic relationship.”

Jörg Ackermann, Partner PwC Luxembourg

Contact us

Jörg Ackermann

Partner, Regulatory Advisory Services, PwC Luxembourg

Tel: +352 49 48 48 4131

Xiaoyan Huang

Director of China market, PwC Luxembourg

Tel: +352 62133 38 20

Dariush Yazdani

Partner, Global AWM Market Research Centre Leader, PwC Luxembourg

Tel: +352 49 48 48 2191

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