Viktor Orbán has turned Hungary into the primary house for Chinese language capital in Europe, capturing greater than 1 / 4 of all Chinese language funding coming into the continent over the previous two years.
The outsized share, together with a wave of funding into EV factories, has been a fillip to an in any other case struggling Hungarian economic system hit by the EU withholding about €20bn of funding over rule of legislation issues.
Orbán’s problem now could be pulling off the diplomatic gymnastics required to concurrently stay an ally to Xi Jinping and Donald Trump’s incoming administration of China hawks, whereas managing the specter of a persistent decline in EU funds.
Even in opposition to the backdrop of his rule of legislation dispute with Brussels, Orbán has exacerbated tensions with different EU capitals by sustaining robust diplomatic ties with each Beijing and Moscow.
Márton Nagy, economic system minister and a former adviser to prime minister Orbán, advised the Monetary Occasions that China’s investments had helped keep the nation’s automotive business as “a really robust core” of its economic system, which is finally anticipated to account for nearly a 3rd of GDP.
China’s most necessary EV and battery teams — BYD and CATL — have been amongst these scouring the EU for native manufacturing websites, even earlier than Brussels put new tariffs on Chinese language exports.
BYD final 12 months selected the southern Hungarian metropolis of Szeged as the situation for its first giant manufacturing facility in Europe. CATL is constructing a €7.3bn plant within the east of the nation.
Whereas each Chinese language firms are privately owned, they’ve shut ties with Beijing and have been key beneficiaries of a supportive Chinese language industrial coverage for years.
Hungary emerged as an ideal companion for the Chinese language firms, with decrease labour and land prices than different components of Europe coupled with the backdrop of heat political ties between Beijing and Budapest.
China upgraded Hungary to certainly one of its closest international partners in Might, with Xi pledging to spend money on key infrastructure tasks throughout a go to to Budapest.
Nagy mentioned each BYD and CATL would open their doorways by the second half of subsequent 12 months, together with a string of different Chinese language greenfield investments, with their influence on the economic system and wages being “felt as quickly because the work begins”.
The paraphernalia throughout Nagy’s desk, together with dragons and a reputation plate that includes Chinese language script, have been an indication of Budapest’s tireless efforts to court docket China.
With autos produced within the EU in a position to keep away from tariffs of as a lot as 45 per cent levied by Brussels on exports coming immediately from China, Nagy mentioned the EU’s “unfriendly step” was additionally “a fairly silly step”.
“Such duties might be prevented if manufacturing is localised,” he mentioned. “And simply because we [impose a duty], how will our personal automotive business be stronger in two, three or 4 years? We must give loads of subsidies to the sector, analysis and improvement funds, to spice up home manufacturing. However there isn’t any signal of that.”
Hungary’s authorities believes China’s investments will provide a lifeline to an economic system dealing with extreme challenges which have positioned it among the many weakest performers within the EU.
Hungary is now in recession, with GDP falling by 0.7 per cent within the third quarter. The federal government expects its finances deficit to hit round 4.5 per cent of GDP this 12 months, effectively over the EU’s 3 per cent restrict.
Analysts suppose the 4.5 per cent determine could show over-optimistic and are involved that Orbán, dealing with re-election in 2026, will additional weaken the fiscal state of affairs by elevating spending to ranges the nation can not afford.
Each the economic system minister and Orbán imagine that Budapest’s shut ties with Beijing might be maintained whereas protecting Donald Trump onside, regardless of the US president-elect’s threats to levy a tariff of 60 per cent on all imports from China into the world’s largest economic system.
“Trump is a businessman, he’ll make offers,” Nagy mentioned. “He’ll make deal for the US . . . for us the main target is on Europe-China relations. Don’t overlook that Biden already levied these tariffs and the commerce warfare has already began.”
Orbán advised public radio station M1 final month that sustaining a balancing act between east and west was his financial coverage’s “strategic basis” and claimed others, together with the US, will pursue Chinese language ties as effectively. “[China] is right here, robust, growing, our activity is to make good offers with them.”
Ilaria Mazzocco, a senior fellow on the Heart for Strategic and Worldwide Research in Washington, mentioned Budapest’s technique had been “efficient”, attracting funding not simply from Chinese language producers however different EV suppliers.
“There’s clearly rather more political involvement,” Mazzocco mentioned. “That is now not only a enterprise resolution.”
However others suppose China is unlikely to have the ability to plug the gaps left by Brussels, with the EU additionally in a position to grant funds for social tasks that produce no monetary acquire.
“Chinese language FDI alone is not going to offset Hungary’s present shortfall in EU funds,” mentioned Gregor Sebastian, a senior analyst at Rhodium Group.
Hungary used to obtain round €5bn in annual EU transfers, value about 2.5 per cent of GDP, in line with the European Fee. Since confirming the BYD funding in February, China has made no new spending pledges to Hungary.
A scarcity of funding in public infrastructure has additionally made the federal government susceptible to political assaults.
One casualty has been Hungary’s battered railway community, the place about €10bn-worth of principally EU-funded investments have been cancelled, in line with railway knowledgeable and opposition politician Dávid Vitézy. The home finances is just too strained to exchange them.
“We might have had a golden age within the rail sector on this decade,” Vitézy advised the FT. “What’s left is subsequent to nothing.”
The one main railway development undertaking below means is a Chinese language-funded rail line traversing sparsely populated areas between Budapest and the Serbian capital Belgrade. It’s a part of Beijing’s $1tn Belt and Street international infrastructure initiative and can principally serve Chinese language cargo.
Orbán’s fiercest opponent forward of parliamentary elections in 2026, Péter Magyar, of the centre-right Tisza celebration, has seized on the railways’ dire state, saying earlier this 12 months they have been in “an unprecedented disaster” after a heatwave pushed the prepare system close to to break down.
A number of trains derailed on malfunctioning outdated switches, narrowly avoiding accidents. “This prepare has gone,” he mentioned. “Hungarians received’t wait.”
