（National Cheng-chi University Center for WTO Studies, College of International Affairs Adjunct Distinguished Professor of Diplomacy and Director To-hai Liou）
After being sworn in in December 2023, Donald Tusk, who was president of the European Council from 2019 to 2022, returned to the helm of the Polish government, supporting Ukraine as well as hoping to bring Poland back to lead Europe. Whether or not Tusk will change its traditional friendly policy toward China remains to be seen. One thing is almost for sure that this new development makes Hungary unique in the EU, and it is almost the only country that still maintains friendly relations with China and Russia. This essay is to compare China’s economic relations with Hungary and Poland in recent years so as to explain why Poland and Hungary now is likely to have different approaches to China.
Given their strategic locations between Asia and Europe as well as China’s One Belt One Road Initiative (BRI), Poland and Hungary in recent years have emerged as a sort of interface states between the two continents. Among the Visegrád Group (V4) countries, the two countries have responded to China’s BRI very positively, while the other two, namely the Czech Republic and Slovakia, have been relatively lukewarm. Hungary was the second central and eastern European country to be directly served by the China-Europe Express Train after Poland. However, Hungary is the first European country to sign an intergovernmental cooperation document with China to build the "Belt and Road."
At least two facts can explain why Poland is likely to change its China policy to a tougher one after Tusk took office as the prime minister. First, national interest matters. There is no doubt that both Poland and Hungary look at Beijing primarily from an economic perspective rather than from security consideration or political interests. Between 2000 and 2019, the cumulative value of Chinese FDI deals in Poland amounted to just €1.4 billion, while Hungary received US$5 billion in investments from China over the same period.
Second, recent development also demonstrates that China attaches importance to Hungary for its unique position in the EU. Chinese Foreign Minister Wang Yi announced the granting of visa-free status to the six European countries, including Hungary but without Poland, starting from March 2024. Giving this unilateral visa-free privilege to those EU countries who are friendly to Beijing shows that China attaches importance to improving relations with the region with an expectation of a reciprocity treatment from those countries. More importantly, for Beijing, this demarche is designed to allow the West to understand China through first-hand experience rather than news reports or hearsay.
In a deeper exploration, we find that this did not happen by accident, but a synergy of Sino-Hungarian national interests and policy orientations. It was China who made the first move by inaugurating its BRI via Chinese President Xi Jinping’s speech at Nazarbayev University during his visit to Kazakhstan in September 2013. This was the origin of the Silk Road Economic Belt concept based on high speed railway (HSR). Xi suggested that China and Central Asia cooperate to build a Silk Road Economic Belt with a focus on bringing together China, Central Asia, Russia and Europe (the Baltic); linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and the Indian Ocean.
As for Hungary, the country is looking to emphasize its role as a land transportation hub for China-Europe freight trains as it aims to further promote comprehensive cooperation with China in the fields of modern trade, logistics and e-commerce. Over the last decade, the Hungarian government under Viktor Orban has deepened ties with China. Hungary’s participations in the 16+1 format, a cooperation format linking China and Central and Eastern Europe (CEE), and in the Chinese BRI are remarkable examples of the intimate Sino-Hungarian relationship. The rationale behind Hungary’s increased commercial and political relations with the East lies in a particular policy known as Eastern Opening (Keleti Nyitás). First announced after Orban and his Fidesz party’s election victory in 2010, it aims to reduce Hungary’s dependence on Western countries and reorient the country toward the east in the hope of obtaining investments and loans. As a result, Hungary has been able to emerge as an Asia-Europe transportation, logistics and manufacturing hub, taking advantage of its bilateral economic cooperation with China. One salient Chinese project in Hungary is the Budapest-Belgrade railway, financed through a Chinese loan and the BRI’s most important project in Europe. At present, almost all the railroads connecting Central and Southern Europe are east-west connections, and what is most lacking is a north-south railroad. In other words, the biggest contribution of the Budapest-Belgrade railway to the economic integration and transportation of Europe is that it is the first north-south railroad in the region.
In addition to the convergence of their transport development strategies, the economic development and foreign trade policies of China and Hungary also complement each other. China's overcapacity of production, saturated domestic EV market and fierce competition further drive its exports and capital outflow, while Hungary seeks to absorb foreign capital and transform itself into a manufacturing hub. It is within this context another policy interface between the two countries that is mutually beneficial thus emerges.
According to the data published by the Hungarian Central Bank (MNB), Hungary attracted more than €13 billion foreign direct investment (FDI) in 2023, doubling the previous high of € 6.5 billion in 2022 and creating a record of 19,000 jobs. China was the biggest foreign investor in Hungary in the year, with the second largest group of investors being Hungarian businesses. Hungary’s investment records clearly made the country a winner of the new era of the global economy, defined by the electric vehicle industry. Hungary will also have the second-biggest EV battery manufacturing capacity in the world, making it a global leader and the European champion of the green auto industry. Chinese battery manufacturers have announced more than $10.9 billion worth of investments in Hungarian factories over the past year. Chinese EV battery manufacturers are flocking to Hungary drawn to the country’s access to European automakers, government subsidies, and favorable relations with China. Chinese EV maker BYD (比亞迪) is a salient example. The company opened its first European electric bus factory in the northern Hungarian city of Komarom, with an investment of 20 million euros (US$21.3 million) in April 2017. Then, BYD chose the southern Hungarian city of Szeged, making it the sixth car factory in Hungary in December 2023. The world's leading manufacturer of new energy vehicles (NEVs) is expanding its market with new factories and will build its first European new energy passenger vehicle factory in Hungary.
Moreover, in recent years several more flagship investment projects from China were led by the global leader in the electric battery market, Chinese battery giant CATL (寧德時代) to build Europe's largest lithium-ion plant to supply Mercedes, BMW and Volkswagen in the southern industrial park of Debrecen, Hungary's second-largest city. The 7.3 billion euro ($7.6 billion) battery plant project enough to power more than a million new cars annually was announced in August 2022 and is set to begin in 2025. The Hungarian government will provide the CATL plant up to US$860 million in infrastructure and tax incentives. Furthermore, EVE Power (億緯動力) signed a land purchase agreement with a subsidiary of the Debrecen government for the factory to make cylindrical power batteries. With an investment of 400 billion forints ($1.18 billion), it will create more than 1,000 jobs. On top of that, Huayou Cobalt (華友鈷業) announced in June 2023 to build a 52 billion Hungarian forint anode plate plant in Ács, 95 kilometers west of Budapest, its first plant in Europe. Another Chinese battery maker Sunwoda (欣旺達) also decided to build its first European plant with an investment of 580 billion forints (€1.5 billion) in Nyíregyháza, eastern Hungary in July 2023. Previously, Huashuo Technology Co Ltd. (浙江華朔科技) already made an investment of €40 million in Debrecen and set up Halms Hungary Kft. to produce aluminum parts for the production of batteries in 2022. Also, Semcorp (恩捷), the world's leading supplier of a key component in electric vehicle batteries, invested about 340 million euros ($365 million) in Decrecen to build a factory for producing battery separators with a goal of raising its global market share from 37% in 2022 to 50% by 2025. In addition, Shezhen Kedali Industry (深圳科達利實業) opened battery parts plant in Gödöllő.
In conclusion, China views Hungary from the perspective of a future macroeconomic vision for Asia and Europe. The chances of future economic and trade cooperation between Hungary and China are promising for three main reasons: geopolitical factors, technological breakthroughs, and policy convergence between China and Hungary due to the convergence of their interests. In fact, geopolitical and economic factors have always existed in Asia-Europe economic and trade interactions, as evidenced by the ancient Silk Road, which was later cut off due to political factors. Nowadays, the breakthroughs in high-speed rail technology and China's proactive Belt and Road Initiative have led to the revitalization of Asia-Europe economic and trade interactions, which are set to continue to grow. The closer economic relationship between China and Hungary is in fact the precursor and the best microcosm of the current and future strengthening and even integration of Asia-Europe economic relations. If the United States really elects Trump as next president, it will become the gas pedal of this trend, because Trump's strong protectionist and isolationist tendencies will increase America’s political and economic conflicts with both China and Europe, which favor globalization and free trade, and lead to the strengthening of bilateral trade and economic relations between China and Europe. Therefore, we cannot rule out the possibility that the Sino-European investment agreement could be passed by the European Parliament in the future. Of course, Europe’s concerns about China's trade invasion such as EVs and cross border e-commerce could remain a restraining factor.
