Hungary cashes in on its friendship with China

In an open letter to Hungary that in places reads more like a love note than an official government missive, Chinese President Xi Jinping reflected on a friendship “as mellow and rich as Tokaji wine.”

As sweet as Hungary’s wine is, its partnership with China is far more profitable, both politically and economically — and it’s setting up Hungary to be a dominant player in the continent’s shift to electric vehicles.

Despite governing a country that has been a member of the European Union for 20 years, Hungarian PM Viktor Orbán identifies more closely with Xi than with his peers in the bloc, often bristling at European bureaucracy, rejecting its immigration and social policies, and denouncing its criticism of his government’s backsliding on the rule of law. 

“We see each other as a priority partner of cooperation,” Xi wrote. “We have gone through hardships together and defied power politics together amid volatile international situations.”

The political alignment is also paying economic benefits as China showers Hungary with investments, especially in EVs and batteries.

Driving buddies

Xi and Orbán’s close relationship has been on full display this week as the Chinese leader wraps up his first Europe tour in five years by visiting Hungary — a sharp contrast to the start of his trip in Paris, which was overshadowed by a tense meeting with French President Emmanuel Macron on trade and the war in Ukraine.

The two leaders are expected to announce a new Chinese EV factory, built by Great Wall Motor (GWM) in Pécs. Chinese electric vehicle giant BYD has already broken ground on its first European factory in Szeged, a city in the south of Hungary close to its border with fellow China-ally Serbia, that will produce an estimated 200,000 cars a year.

Chinese firms have invested €16 billion in Hungary, making China the country’s No. 1 investor, Péter Szijjártó, Hungary’s foreign minister, said during an event with Chatham House on Wednesday.

“We look at our cooperation with China as a huge chance and a huge opportunity,” he said.

China and Hungary are expected to sign more than 16 new cooperation agreements covering everything from cars to nuclear energy, according to Szijjártó. Xi’s visit ends Friday.

China sees Hungary as an ally at a time when many other EU countries are increasingly wary of Beijing, and as a production hub that will enable its car producers to skirt possible EU tariffs. The European Commission is expected to release the results of its anti-subsidy investigation into Chinese EVs, and to levy new duties on the vehicles, as soon as this summer.

But the tariffs, which are expected to be in the range of 15 percent to 30 percent, are unlikely to be high enough to deter Chinese manufacturers, particularly big players like BYD which can produce cars at a low cost thanks to their robust supply chains.