The European Commission said the transaction “would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.”
The commission found that the overlap between Geely and Volvo was “very limited” since the Chinese company “has almost no passenger car sales in Europe.
“Furthermore, Volvo’s very limited presence in the field of supply of diverse car components would not allow the merged entity to close off other market players,” the commission said in a statement.
The European body also noted that the sole business of the regional state fund “is the investment and management of state-owned assets.”
Geely sealed a deal worth 1.8 billion dollars in March to buy loss-making Volvo from Ford Motor of the US.
Geely has said it had plans to expand Volvo’s presence in China, now the world’s largest car market.