How Europe and Asia are reconnecting through investment

Back in 2020, I wrote about the occasionally fraught but mostly happy relationship between China and the United Kingdom. At that time, Huawei, Brexit, and Covid-19 dominated headlines. Global capital flows were down, the National Security and Investment Bill was about to receive Royal Assent, and inbound M&A had fallen by £39.3 billion from 2019 – less a statistic and more an indictment.

Five years on, the world remains frayed by conflict and volatility. While the United States remained the de facto global leader for decades, it has been gradually retreating from its role. In that lacuna, the global investment environment seems to have reconfigured itself around new anxieties. 

A shifting global order

Increasingly, cross-border transactions are being put on hold. Meanwhile, following a brief 18% rally in 2024, M&A is expected to plateau this year. For the investment community, regulatory uncertainty and ambient risk are now the norm in international trade and investment. 

That quiet reckoning in the global order has also had a direct impact on the East-West investment corridor. Driven in part by a common desire for policy continuity and political stability, and a shared history of trade and commerce, Asia and Europe are re-connecting with each other. 

Chinese investment in the UK and the EU, long thought to be in terminal decline, rose 47% in 2024, reaching €10 billion. That is the first real uptick since 2016, when relations began to plateau and subsequently became more strained amid US-China trade tensions.

There has also been a recalibration in the quality and manner of investment. Gone is the swagger of the 2010s; I instead of the headline-grabbing, trophy acquisitions that draw political scrutiny and Foreign Direct Investment (FDI) regulation, we now have greenfield projects, building of electric vehicle plants, and smaller investments in Environmental, Social and Governance (ESG). The relationship between the UK and China, and more broadly between Asia and Europe, is evolving – incrementally but purposefully, with the kind of momentum that becomes visible only in hindsight.

The question for the UK is whether it can continue to attract serious, meaningful investment in this new world. While Chinese investment in Europe has increased, the UK’s share has declined. Hungary and Poland have emerged as serious contenders, offering purpose-built ecosystems for technology and advanced manufacturing, attracting multinational Research and Development (R&D) and assuming the role previously held by Ukraine as the region’s innovation hub. 

Once the leading destination for inbound capital from Asia, the UK now competes for relevance.

China, of course, is not the whole of Asia. Other countries – Singapore, Japan, South Korea, Australia, and New Zealand – are also looking westward in search of more stable and predictable partners. 

Among them, Singapore has firmly established itself as the regional gateway for private equity, venture funds, and institutional investors deploying capital across Southeast Asia and globally. In 2024 alone, the city-state accounted for £19.3 billion in inward FDI into the UK.

More importantly, Singapore offers an obvious way for the UK to diversify inbound investment. It shares the UK’s legal DNA, having inherited the Westminster parliamentary model and an English-based legal system. Importantly, it also plays a leading role in the Association of Southeast Asian Nations (ASEAN), which boasts a combined GDP of £2.8 trillion and equivalent to the fifth-largest economy in the world. Unlocking that pool of capital could be transformational.

There is a gentle reciprocity in this courtship. Like Singapore, other Asian countries have been consistently and vocally open for business. In response, European corporates are deepening their presence in Eastern markets, driven by supply chain diversification and digital transformation. 

The UK’s strategic choice

Similarly, UK companies are expanding into China and Southeast Asia, particularly in luxury retail, fintech, and professional services. Brexit, for all the consternation it caused, has forced a kind of strategic clarity. The result is greater balance and a more enduring, two-way relationship.

There is no doubt that foreign investment, once the lifeblood of the City, has been faltering for some time. But the UK remains an essential global investment destination.

The weaker pound continues to attract capital, our legal system remains trusted and adopted in global transactions, and sectors like infrastructure, biotech, green energy, education, and AI are leading lights. 

If 2020 was a study in inertia for UK investment, 2025 may yet be a renaissance – a strategic repositioning with Asia that redefines the UK’s role in the world economy.