Viktor Orbán has turned Hungary into the principle dwelling 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 considerations.
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 power decline in EU funds.
Even towards the backdrop of his rule of legislation dispute with Brussels, Orbán has exacerbated tensions with different EU capitals by sustaining sturdy diplomatic ties with each Beijing and Moscow.
Márton Nagy, economic system minister and a former adviser to prime minister Orbán, instructed the Monetary Instances that China’s investments had helped preserve the nation’s automobile trade as “a very strong core” of its economic system, which is finally anticipated to account for nearly a 3rd of GDP.
China’s most vital 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 corporations 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 corporations, 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 one in every of its closest worldwide companions in Could, with Xi pledging to spend money on key infrastructure initiatives 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 soon as the work starts”.
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 courtroom China.
With automobiles 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 straight from China, Nagy mentioned the EU’s “unfriendly step” was additionally “a rather stupid step”.
“Such duties can be avoided if production is localised,” he mentioned. “And just because we [impose a duty], how will our own car industry be stronger in two, three or four years? We would have to give a lot of subsidies to the sector, research and development funds, to boost domestic production. But there is no sign of that.”
Hungary’s authorities believes China’s investments will supply a lifeline to an economic system going through 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 price range deficit to hit round 4.5 per cent of GDP this 12 months, properly over the EU’s 3 per cent restrict.
Analysts assume the 4.5 per cent determine might show over-optimistic and are involved that Orbán, going through 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 consider that Budapest’s shut ties with Beijing could be maintained whereas preserving 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 will make deals,” Nagy mentioned. “He will make a good deal for the US . . . for us the focus is on Europe-China relations. Don’t forget that Biden already levied these tariffs and the trade war has already started.”
Orbán instructed public radio station M1 final month that sustaining a balancing act between east and west was his financial coverage’s “strategic foundation” and claimed others, together with the US, will pursue Chinese language ties as properly. “[China] is here, strong, developing, our task is to make good deals with them.”
Ilaria Mazzocco, a senior fellow on the Heart for Strategic and Worldwide Research in Washington, mentioned Budapest’s technique had been “effective”, attracting funding not simply from Chinese language producers however different EV suppliers.
“There is clearly much more political involvement,” Mazzocco mentioned. “This is no longer just a business decision.”
However others assume 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 initiatives that produce no monetary acquire.
“Chinese FDI alone will not offset Hungary’s current shortfall in EU funds,” mentioned Gregor Sebastian, a senior analyst at Rhodium Group.
Hungary used to obtain round €5bn in annual EU transfers, price about 2.5 per cent of GDP, in accordance 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 accordance with railway knowledgeable and opposition politician Dávid Vitézy. The home price range is simply too strained to interchange them.
“We could have had a golden age in the rail sector in this decade,” Vitézy instructed the FT. “What is left is next to nothing.”
The one main railway building undertaking beneath method 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 Highway world 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 occasion, has seized on the railways’ dire state, saying earlier this 12 months they have been in “an unprecedented crisis” 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 train has gone,” he mentioned. “Hungarians won’t wait.”
