Brussels is getting fed up with Chinese investment in Hungary
Last year, Chinese battery manufacturer CATL committed to build a €7.3 billion battery factory in Debrecen. In addition, a number of other Chinese companies in the electric vehicle supply chain, including Nio, EVE Energy, Huayou Cobalt, BYD, and Ningbo Zhenyu Technology, have recently unveiled plans for new factory projects in the country.
The Hungarian government says China has been the country's leading foreign investor since 2020, and Budapest wants more — which is why politicians are ensuring that relations with Beijing stay smooth. Hungarian Prime Minister Viktor Orbán was the only EU leader to attend October's Belt and Road Initiative forum, with Chinese President Xi Jinping calling him Beijing's "friend." The Hungarian government, Orbán said, “shall not accept any kind of external ideological pressure” and will always follow national interests, Politico says in its analysis, which suggests that the BYD investment could be unveiled at the end of the year.
Echoing these sentiments, Foreign Minister Péter Szijjártó was even more explicit in June, stressing that any effort to edge away from China would damage Europe.
Hungary's strategic steps include joining the 14+1 format (which used to to be the 16+1 format before some EU countries quit), linking China with Central and Eastern Europe, and participating in China's Belt and Road Initiative. Notably, Hungary has blocked EU statements condemning China on human rights issues.
"The Hungarian government pictures itself as a bridgehead for China," said Dóra Győrffy, an economics professor at the Corvinus University of Budapest. The rest of the EU should be "very concerned" about this, she added.
As European Commission President Ursula von der Leyen and European Council President Charles Michel visit Beijing to discuss the huge trade surplus between China and the EU, Brussels is alarmed by Hungary's growing economic dependence on China.
Az Európai Bizottság már szubvenciós vizsgálatot indított a kínai elektromos járművek nem megfelelő támogatásának ügyében. De ahogy arról korábban írtunk, a magyarországi akkumulátorgyártók ügyében is elindulhatnak az uniós FDI-monitoring vizsgálatok a cégeknek Peking által folyósított állami ösztönzőket ellenőrizve. Egyelőre azonban még nem indult egyetlen FSR-eljárás az EU-ban.
The European Commission has already launched a subsidy investigation into inadequate support for electric vehicles in China. But as Portfolio previously reported, EU FDI monitoring investigations could also be launched into Hungarian battery manufacturers to check state incentives given to firms by Beijing. But so far, no FSR investigation has been launched in the EU.
Analysts warn that Hungary could pay a heavy political price for Chinese investments.
Like Russia, China can also use any kind of economic vulnerability for blackmailing,
Dóra Győrffy told Politico.
Hungary, which relies heavily on the automotive industry, has attracted investment from German, South Korean and Japanese car manufacturers and parts suppliers because of its skilled but affordable workforce and proximity to the EU market. But the economic benefits are also matched by political considerations, as evidenced by CATL's decision to set up in Hungary after Estonia and Latvia withdrew from the 16+1 format.
Despite the potential consequences, Hungary seems determined to pursue its policy of Eastern Opening, as Minister of Economic Development Márton Nagy hails the country as a leading destination for Chinese business investment in Central Europe. He expects that by the end of 2023, more than a third of foreign direct investment in Hungary will come from Asian countries.
Cover photo: Getty Images
