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CWA # 1311, 16 May 2024
NIAS Europe Studies
President Xi in Hungary: An evolving symbiotic partnership vis-à-vis Europe

  Akhil Ajith

By Akhil Ajith

What happened?
On 08 May, Chinese President Xi Jinping arrived at Budapest as a part of his Europe visit , and held talks with President Tamas Sulyok and Prime Minister Victor Orban. During his visit, the two countries signed a strategic partnership besides 18 other agreements and memoranda of understanding. The two sides agreed to maintain high-level exchanges, strengthen political mutual trust, and deepen cooperation for mutual benefit to keep the bilateral relationship at a high level and bring more benefits to the two peoples.

The joint statement said: “China respects Hungary's independent choice of a development path and domestic and foreign policies suited to its national conditions, and supports the efforts made by the Hungarian side to maintain national stability and promote economic development.”

PM Orban said, “Chinese president’s visit marking the 75th anniversary of diplomatic ties was an honour and noted the last such visit had happened 20 years ago.” 

In a joint statement on the upgrade of their relationship, both China and Hungary said the “two sides are committed to enhancing synergy between the Belt and Road Initiative (BRI) and Hungary's “Eastern Opening” policy. It also stated that the two sides will ensure cooperation in emerging fields, including clean energy, artificial intelligence, mobile communication technology, nuclear energy, and technology.

What is the background?
First, China-Hungary bilateral relations. In October 1949, Hungary was the first European country to recognize the People’s Republic of China. However, an agreement in October on “Friendly Partnership of Cooperation,” gave a momentum to bilateral relations. China was one of the pivotal countries, when Hungary launched the “Opening to the East” policy in 2010, seeking comprehensive political, economic, and cultural partnerships with Asia. On 09 May 2024, China and Hungary elevated the above relations to an all-weather comprehensive strategic partnership.

On trade, according to the China-Hungary Investment and Cooperation Report, the bilateral volume in 2023 reached USD14.52 billion, an increase of 73 per cent compared with the 2013 trade flows. Hungary imported 11.79 billion with of goods which includes electrical and electronic goods, plastics and chemicals. Hungary exported 2.73 billion worth of goods which includes electronic equipment, machinery, organic chemicals, railway products, glassware, etc.  China’s foreign direct investment in Hungary was EU7.6 billion  in 2023, accounting for 58 per cent of Hungary’s total FDI.

Second, Hungary and China’s BRI projects since 2015. Hungary was the largest recipient of Chinese FDI, with USD 571 million in 2021. Today, Hungary hosts USD 1.5 billion battery manufacturing plant by Contemporary Amperex Technology Co., Limited (CATL) in Debrecen, the biggest outside China. Huawei has a presence in Hungary, catering to the EU demands and other international markets. Budapest-Belgrade railway remains a BRI flagship project, announced in 2013 at Euro 2.3billion. China aims to connect the railway line to the Piraeus port in Greece, linking the Mediterranean Sea with the heart of Europe.

Third, the Europe factor in Hungary-China relations. For Beijing, Hungary is an entry point to Europe and the EU. With its growing economic profile in Hungary through its industries, China aims to expand its market and boost its exports by making Hungary an export hub. Besides the above, for China Hungary’s political rights in the EU and its ability to influence any major policy decisions, from the Russia-Ukraine war to Chinese imports, are critical for Beijing to secure its interests.

For Hungary, with Budapest’s frosty ties with the EU on the Russia-Ukraine war and Chinese imports, it aims to partner with China as a leverage. Hungary sees Europe as a challenge to its Hungary-first policy. Hungary sees EU demands as a threat on issues relating to annual funding and financial assistance; China is seen as a leverage vis-à-vis EU.

Hungary is also a part of the Central European ‘16+1’ format, that hosts the heads of governments of China, Albania, Bulgaria, Bosnia and Herzegovina, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Slovakia, Slovenia, and Serbia. The group discusses various areas of cooperation including in the strategic sectors such as EV, green energy, telecommunication, etc.

What does it mean?
First, ties with Hungary as leverage for China to mitigate the negative effects of its increasingly fraught relations with the European Union. For example, the production of EV cars in Hungary could help China avoid possible punitive tariffs and enable it to compete more effectively with European brands. Hungary presiding over the rotating EU presidency from 01 July, will be critical for China to expand its political leverage over the EU.

Second, a strategic partnership with Hungary will help China to improve ties and secure its interests in Central and Eastern Europe. For Beijing, Central and Eastern Europe (CEE) has least engaged with compared to other regions of Europe. The China-CEE, or the 16+1 cooperation, has facilitated China to make the region part of China’s extended neighbourhood. Through BRI, China wants to cement its ties with these countries economically and politically. It wants to use its BRI projects to expand its influence to create a divide within the EU. China sees CEE as Europe’s soft underbelly and aims to use economic and political tools to promote and secure its regional interests, which the US and EU have challenged through de-risking and decoupling strategies.

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