FOREIGN DIRECT INVESTMENT FROM EU COUNTRIES AS INSTRUMENTS FOR FINANCING CHINA’S RAPID ECONOMIC GROWTH: SECURITY RISKS

The aim of the article is to justify the role of foreign direct investment (FDI) from European Union countries as a financial instrument supporting China’s rapid economic growth, while emphasizing the security implications of such investment for Europe and the global economic system. The relevance of the study is reinforced by intensifying geopolitical tensions, the European Union’s transition toward a policy of “de-risking” and strategic autonomy, and the growing securitization of trade, technology, and investment policies that increasingly link international capital flows to issues of resilience, technological sovereignty, and control over critical assets. The article examines the theoretical foundations of investment-driven interdependence and the mechanisms through which EU-origin capital contributes to China’s industrial modernization, technological upgrading, and expansion of innovation capacity in technology-intensive sectors. Particular attention is devoted to the institutional environment shaping EU–China investment relations and to structural vulnerabilities that may arise from deep economic integration. These vulnerabilities include the diffusion of dual-use technologies, cross-border knowledge transfer, and the emergence of dependencies in strategically important supply chains that may weaken the EU’s economic security and strategic autonomy. Using empirical evidence for the period 1990–2024, the study identifies a strong positive association between EU FDI inflows, China’s GDP growth dynamics, and indicators of technological development. At the same time, the analysis suggests that sustained economic expansion supported by foreign capital may indirectly contribute to the growth of China’s military expenditure and the strengthening of technological capabilities with potential defense applications. These dynamics highlight the broader security externalities associated with investment cooperation in high-technology and dual-use sectors. The results support the need to strengthen EU-level investment screening mechanisms and to adopt a risk-based, sector-specific approach to FDI governance in order to balance economic openness with security considerations under conditions of increasing geopolitical competition.