Hungarian foreign minister claims Chinese automotive companies set to invest another €3bn

Hungarian foreign minister claims Chinese automotive companies set to invest another €3bn
Hungarian Foreign Minister Peter Szijjarto (left) and Chinese Minister of Foreign Affairs Qin Gang in Beijing on May 15. / bne IntelliNews
By Tamas Csonka in Budapest May 16, 2023

Hungary is on track to receive an additional €3bn of Chinese automotive investment, further strengthening the country’s position as the number one Central European investment destination for companies from the East Asian country, Foreign Minister Peter Szijjarto said during a visit to Beijing on May 15.

Szijjarto met Chinese Minister of Commerce Wang Wentao and had talks with the chief executives of five major Chinese companies, four of which will implement investments in Hungary’s electric vehicle industry, which supplies German car manufacturers. 

Chinese companies consider the country a top destination for their investments in Central Europe, noting that by the end of 2022, Hungary had the largest volume of Chinese investments in the region, and the government will continue to offer maximum incentives for Chinese investments, he added.

Between 2017 and 2021, the country received less than 1% of all Chinese investment in Europe. In 2022, by contrast, Chinese investment in Hungary was almost entirely driven by CATL’s new gigafactory with an announced total value of €7.4bn.

The radical rightwing government of Viktor Orban stepped up efforts to improve political ties with China through the launch of the Opening to the East policy in 2010. The plan involved strengthening ties with countries outside the EU, mostly in fast-developing countries in Asia.

Hungary was the first European country to sign a memorandum of understanding (MoU) on the Belt and Road Initiative (BRI), one of the hallmark projects of which is the 350km high-speed railway between Budapest and the Serbian capital Belgrade. Chinese FDI investments have seen an upswing since the end of the pandemic.

China Construction Bank (CCB), the world’s second-largest bank in assets, opened a new branch in April. Hungary is home to the first renminbi (RMB) clearing centre in CEE and Bank of China also established its branch in Budapest in the mid-2010s.

Budapest has stepped up efforts to reduce its dependence on traditional vehicle manufacturing and investments in EV battery production have increased, with Chinese companies playing a major role.

The foreign ministry’s statement notes that Szijjarto held talks with the heads of five major Chinese companies. Four out of five automotive companies are coming to Hungary to serve the demand of German car manufacturers already present in the country, he added.

Chinese investments in the electric vehicle industry are a "guarantee" that Hungary's economy will remain on the growth path, he added.

Hungary’s top diplomat had a working dinner with CATL CEO Robin Zeng. CATL’s battery plant in Hungary ranks as the largest Chinese greenfield investment not only in Hungary but in Europe. The project has been earmarked €700mn in subsidies despite environmental concerns and questions about the secure energy supply. There are huge question marks over how Hungary’s ageing electricity grid could cope with new energy-intensive industrial units.

CATL, the world’s leading battery maker, is setting up a 100 GWh plant in the local industrial park on 221 hectares with an investment of €7.4bn, the largest greenfield investment in Hungary.

These EV battery plant investments are helping to boost Hungary’s competitiveness within Europe, given that Chinese investments bring the most cutting-edge technology to their new bases, according to Szijjarto.

Opposition parties and environmental groups disagree. The new plants will require a tremendous amount of water, and they are asking for guarantees that the water supplies of the local residents will not be disrupted.

Budapest will also deepen cooperation with Chinese ICT Huawei. The University of Public Service (NKE) has joined Huawei's SEEDs, a programme launched to foster talent in the ICT sector. Hungary is leading the way in the field of digitalisation, and the Chinese company has a decisive role in this, according to the minister.

Unlike some of its regional peers, some as Czechia, Budapest has unwavering support to rely on the Chinese manufacturer to develop its 5G network. Szijjarto stressed Hungary provides an open and fair economic and business environment for foreign investors and nobody may be excluded from the competition on the basis of their country of origin.

In talks with his Chinese counterpart, Szijjarto stressed that cooperation between the European Union and China should be based on "mutual respect and benefits". "We don't agree with those who say China should be treated as a risk or a threat. We think cooperation with China holds enormous opportunities for its partners," he added.

Political issues including the war in Ukraine were also on the agenda at a meeting with Minister of Foreign Affairs Qin Gang. Hungary attaches a "huge significance" to the role of China in advancing peace, he said, voicing appreciation for China's peace plan. He added that the sides had agreed to cooperate on "amplifying the voice of the peace camp".

Szijjarto was hosted by Yang Yi, director of the Office of the Foreign Affairs Commission of the Communist Party of China (CPC) Central Committee. Hungary’s top diplomat said Budapest is willing to enhance cooperation with China in various fields and push bilateral relations to a new level.