China's Xi wants to woo his close ally, Hungary, by investing more – Euractiv

During the last leg of his European tour in Hungary, Chinese President Xi Jinping is expected to strengthen his ties with Budapest, his closest ally within the European Union, on Wednesday May 8.

After Paris, Xi's visits to Belgrade and now Budapest are significantly less politically sensitive for China, with both countries sharing Beijing's distrust of a US-dominated world order.

Xi's visit to Hungary will also be an attempt to reverse the growing situation sour attitudesEastern European countries towards Beijing after its diplomatic efforts in the region faced a diplomatic blow in recent years.

Seen from Beijing, Budapest could play the role of a bridge between China and Europe in the coming months.

The Chinese Ambassador to Hungary, Gong Tao,said that Beijing expects the Hungarian EU Presidency to pursue a rational and pragmatic policy towards China and to encourage other EU countries to do the same.

Hungarian Prime Minister Viktor Orbn, for his part, wants to use Beijing's visit as a counterweight to pressure from Brussels. Since coming to power, he has continued to push for an “opening to the East” in the country’s foreign policy.

In 2015, Hungary was the first EU member to join China's new “Silk Road” project, making it an important trade and transport gateway for Beijing to Europe.

Last October, Orbn attended a summit on Xi's Belt and Road Initiative (BRI) in Beijing, while all other European counterparts stayed away, and Italy removed from the format shortly after.

As part of the BRI initiative, Chinese loans are financing the expansion of a rail link between Hungary and Serbia to create a connection with the Greek port of Piraeus, majority-owned by Chinese shipping company Cosco.

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Electric vehicles take center stage

Xi will also use his visit to announce new investments, which comes at the right time for Hungary, as Budapest's economy has not benefited from EU funds blocked due to rule of law violations.

While China attracted the most foreign direct investment (FDI) to Hungary in 2020 and 2023, Chinese companies continue to invest in Hungary on a large scale.

In January, the world's largest producer of electric vehicles, with Chinese capital BYD, announced that it would establish its first European production plant in southern Hungary in addition to its electric bus manufacturing site, opened in 2016.

The relationship between BYD and Hungary will likely be driven by economic rather than geopolitical considerations. Several Chinese electric vehicles have expressed interest in manufacturing in Europe to better understand the European market and circumvent trade tariffs. Japanese automakers followed a similar strategy in Europe in the 1980s.

Other Chinese manufacturers are considering building factories in Spain, the United Kingdom and Poland.

The disruptive shift to electric cars has given new Chinese producers the opportunity to enter the lucrative car manufacturing sector, as European automakers struggle to compete with their own electric offerings.

The European Commission has launched a high-profile investigation into Chinese electric vehicle producers. If the investigation concludes that these companies received unfair support from their governments, the EU could impose additional tariffs on Chinese cars imported into the bloc.

However, these tariffs may not be enough to protect European car manufacturers. A recent study concluded that Chinese manufacturers enjoy such a cost advantage over their European rivals that a 50% tariff would be necessary to deter imports of Chinese cars.

European governments could therefore be more receptive to Chinese production on their territory, given the competitive weakness of their national car manufacturers.

“Pro-peace camp”

Beyond trade and investment, Russia's war in Ukraine and China's peace plan are expected to be among the other major topics on the agenda.

Hungarian Foreign Minister Pter Szijjrt said Budapest welcomes Beijing's proposed peace plan above all because it exists and also because it concerns peace, adding that “China is undoubtedly one of the strongest states in the pro-peace camp which continues to emphasize the importance of peace.

There is complete consensus between us on this issue, which is why the possibility of creating peace will be an important topic on the negotiating agenda,” he said.

[Edited by Alice Taylor]

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