China FDI in Europe falls – but not in Hungary
New Chinese investment in Europe in 2024 fell for the second consecutive year – but not in Hungary.
Chinese investment in Hungary now exceeds 16 billion euros. In 2024, seven Chinese projects accounted for nearly 50 per cent of the country’s FDI. It became the largest provider of FDI in 2023, when Hungary accounted for 44 per cent of China’s FDI in Europe, more than France, Germany and Britain combined.
One is an investment of 7.3 billion euros by CATL to make battery cells in Debrecen, with production due to begin this year.
BYD, the world's leading manufacturer of new energy vehicles (NEV), has launched the next stage of its European strategy with construction of a brand-new manufacturing and production centre in Szeged. “The state-of-the-art facility will be the first of its kind built by a Chinese automotive company in Europe and will have the advanced car production line. The factory will be built in phases and is expected to create thousands of local jobs, boost the local economy and support local supply chains,” the company said.
There are two reasons for this large investment.
One is that Hungary is a member of the European Union, with a population of 449 million, the largest and richest market in the world. Goods made in Hungary have free and duty-free access to this market.
Second is the close political and diplomatic relationship between China and Hungary and their two leaders, Xi Jinping and Viktor Orban. Its other ally in Europe is Serbia, not a member of the EU.
Orban is an outcast in the EU because he supports Vladimir Putin, whom the rest of Europe considers a second Adolf Hitler. He regularly vetoes measures aimed to support Ukraine. In November 1940, Hungary joined Hitler as an Axis power and sent troops to take part in the Nazi invasions of Yugoslavia and the Soviet Union.
In 2023, the EU froze 16.7 billion euros in funding for Hungary, saying that its government has not met EU requirements for judicial independence and rule of law. This has made companies from other EU countries reluctant to invest in Hungary. They consider aspects of its government non-democratic and illiberal.
Poland, Romania and the Czech Republic have turned away from China because of disappointment over Beijing’s project for the region, 16 & 1 (China and Central and Eastern Europe).
According to Association of Chinese Enterprises in Hungary, in 2023 China became the largest source of foreign direct investment for Hungary, for the second time after 2020, with the total annual investment up to Euro 7.6 billion, accounting for 58% of the annual foreign direct investment for Hungary.②
“China has become the largest trading partner of Hungary outside Europe and the most important partner of Hungary in the field of investment,” the association said in a report last December. “Investment of Chinese enterprises in Hungary has covered multiple key fields such as infrastructure construction, high-tech development, energy projects and financial services.” Hungary is a member of the Belt and Road Initiative.
More than 80 large Chinese firms have invested there. They include Yantai Wanhua Group, Huawei, ZTE, China Railway, BYD, Yanfeng, China General Technology Group, Shandong Himile, Anhui BBCA Group, Lenovo Group, State Grid Shanghai Municipal Electric Power Company, Yunnan SEMCORP, CATL, Nio, Inovance, EVE Energy, Huayou Cobalt and Sunwoda. Since 2020, investment by Chinese firms in the green energy and new energy vehicle industries of Hungary has reached more than 10 billion euros in investment and planned investment.
Tamas Maturas, assistant professor at Corvinus University in Budapest, said: “all these projects mean Chinese staff, Chinese construction firms and Chinese machines. They do not bring much benefit to us.”
Economist Agnes Szunomar said: “the government’s strategy risks to increase foreign dependence, which has been a characteristic of Hungary’s development. The influence of the Chinese firms could become overwhelming, as was the case before with companies from Germany.”
One risk for Chinese firms is the possibility that Orban will lose the general election scheduled for 2026. The country faces a rebound in inflation, sagging household morale and even a plunge in the birth rate he so wants to boost.
After Russia’s invasion of Ukraine in February 2022, Hungary endured the worst inflationary surge in the EU. Living standards have fallen. An EU survey conducted in January found consumers more pessimistic about their economic prospects than a year ago, while nearly four out of ten Hungarians expect their financial situation to deteriorate.
If Orban loses power, will his successor be so favourable to China?
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