BUDAPEST, Hungary — Chinese leader Xi Jinping will spend most of his five-day tour of Europe this week in two small countries in the eastern half of the continent. The region has been used by the Chinese government as a springboard to expand its economic ambitions in Europe.
After starting his first European tour in five years with a stop in Paris on Monday, Xi will then visit two countries with authoritarian leaders who are pro-China and said to be close to Russian President Vladimir Putin.
Nationalist conservative leaders Viktor Orbán of Hungary and Aleksandar Vučić of Serbia as mainstream European leaders pursue more protectionist policies to limit China and Russia’s influence on the continent. His government has vigorously pursued economic relations with China, focusing on infrastructure, manufacturing, energy and technology.
As the first European Union country to join President Xi’s signature Belt and Road Initiative, Hungary is at the halfway point between EU and NATO membership and an unusually generous diplomatic and trade relationship with eastern authoritarian states. straddles the
Tamas Matula, a China expert and associate professor at Corvinus University in Budapest, said Hungary hosts a major Chinese investment and production base and is agnostic about doing business with countries with uneven democracy and human rights records. has opened an important door to China. within the EU trading area.
“The Hungarian government is China’s last true friend in the entire EU,” Matura said. “It is now very important for Chinese people to settle in a country that is within the borders of the EU and friendly to China’s political system.”
One of the big advantages China has by establishing bases in the EU is avoiding high tariffs. The European Commission, the European Union’s executive arm, has imposed tariffs on imports of Chinese-made electric vehicles (EVs) to protect the European car manufacturing market, which is the mainstay of Germany, the 27-member EU’s largest economy. We are considering raising it from the current 10%.
However, in December, Hungary announced that China’s BYD, one of the world’s largest EV manufacturers, would open Europe’s first EV production factory in southern Hungary. This is an entry into the EU that could completely change the competitiveness of the automotive industry on the Hungarian continent.
The change is already visible in Budapest, where one car dealership has begun cutting back on its supply of European cars and replacing them with BYD models.
Mark Schiller, director of strategy and marketing at family-owned Schiller Auto Group, said he believes European automakers are “already behind China” in the transition to EV production. His company recently stopped selling cars made by German automaker Opel and switched to BYD.
“This was a big change,” Schiller said.
Unconfirmed reports suggest that during Xi’s visit to Hungary from Wednesday to Friday, he and Orbán are expected to announce new EV manufacturing investments, including with China’s Great Wall Motors. Prime Minister Orban’s office did not respond to multiple requests for information on the dates of the visit.
In Serbia, south of Hungary, China operates mines and factories across the Balkans, while billions of dollars in infrastructure loans are funding roads, bridges and new facilities.
Hungary and Serbia have agreed with the Chinese government to modernize the railway between the capital Budapest and Belgrade, part of the Belt and Road Initiative, which will connect the Chinese-controlled Greek port of Piraeus as a gateway to the central region for Chinese goods. This is part of the and Eastern Europe.
The bulk of the project, scheduled to be completed in 2026 after repeated delays, is being financed by loans from Chinese banks, and Hungary and Serbia have been keen to tap into that capital.
Chinese lenders issued more than $22 billion worth of loans to nine countries in Central and Eastern Europe from 2000 to 2021, according to the Aid Data Institute at William & Mary, a public university in Virginia.
Of this, $9.4 billion went to Hungary and $5.7 billion went to Serbia, which dwarfs the totals for other regional countries.
Mr Vučić said he was “honored” that Mr Xi, whom he often described as a “friend”, would visit on Tuesday. Before his visit, he said Serbia would seek more investment from China, especially when it comes to advanced technology.
However, economic analyst Mijat Rakičević said he did not expect another major investment deal because “everything Serbia will do with China has already been agreed”.
Hungary has also provided Chinese companies with generous tax breaks, subsidies and infrastructure support, as well as helped them navigate the Hungarian bureaucracy, creating a favorable investment environment for China.
“They roll out the red carpet and have everything tailored to the government. That’s a big advantage,” said Mathura, the China analyst.
Construction is underway near Debrecen, Hungary’s second-largest city, on a 550-acre (222 hectare), 7.3 billion euro ($7.9 billion) EV battery factory, the largest foreign direct investment in Hungary’s history.
Orbán’s government says the factory, run by Chinese battery giant CATL, will help the country become a global hub for lithium-ion battery manufacturing as the government moves to curb greenhouse gas emissions by switching to electric vehicles. I hope that will happen.
Such investments come as Hungary’s struggling economy is further hampered by record inflation and the freeze on billions of dollars in EU funds that have been withheld because of Mr. Orbán’s record on democratic standards and the rule of law. It is being carried out in the midst of
Matura said China is active in filling holes in Hungary’s budget as EU funds are held up.
“The inflow of EU funds into the Hungarian economy has almost completely stopped and there is now a dire need for Hungary to look at other options, other sources of financial capital,” he said.
Prime Minister Orbán spoke frankly about the reasons for prioritizing Chinese investment. The belief is that Western economies are in decline and China is on the rise.
In a recent speech at the CPAC Hungarian Conservative Conference, Prime Minister Orbán outlined a vision of a “world economy that is ideologically agnostic and organized according to principles of mutual benefit.”
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Jovana Gec reported from Belgrade, Serbia.
