"The model of 'Chinese brand + Hungarian manufacturing + EU market' is taking shape."
Text / Ba Jiuling
Hungary, which has recently attracted the attention of the Chinese.
From May 8 to May 10, China's top leaders visited Hungary upon invitation. During the visit, China and Hungary signed or agreed on as many as 18 cooperation documents. The relationship between the two countries has also been upgraded from a "comprehensive strategic partnership" to an "all-weather comprehensive strategic partnership in the new era."
Hungary is a Central European country with a land area of only 93,000 square kilometers, which is slightly larger than Chongqing. With a population of only 9.8 million, it is about the same as Harbin. The GDP in 2022 will only be 180 billion euros (about 1,401.12 billion yuan), which is a little lower than that of Wuxi. This little-known small European country suddenly stood out from the crowd of European powers and entered the field of vision of the Chinese.
Why did the Chinese leader choose to stay in Hungary for three days and deepen the relationship? What's the big strategy behind this?
To answer these questions, we have to start with the history of Hungary.
Hungary: The Crossroads of East and West
Hungary is small, but it is located in the geometric center of Europe and is known as the "crossroads" connecting East and West. Hungary is located at the intersection of three pan-European transport network corridors, and the capital Budapest is located on the banks of the Danube River (the mother river of Europe).
Sandwiched between East and West, Hungary has undergone many major transformations throughout its history.
In World War II, Hungary sided with the fascists, was an ally of Nazi Germany, and inflicted heavy losses on the Soviet Red Army. After World War II, Hungary was occupied by the Soviet Red Army and joined the socialist camp.
In the 50s, Hungary copied the Soviet planned economic model, which led to economic and social difficulties. Subsequently, Hungary followed Western economic theories and reformed its economic system: decentralizing planning, giving autonomy to enterprises, adjusting prices, abandoning policies that emphasized heavy industry one-sidedly, and encouraging the development of private agriculture.
This set of reform measures in Hungary, which scholars called the "Hungarian model" (in opposition to the "Soviet model"), caused great repercussions in the socialist camp.
After the great changes in the Soviet Union and Eastern Europe, Hungary completely fell into the capitalist camp and started a vigorous privatization campaign. The government has sold large amounts of state-owned and collective assets to private enterprises and multinational corporations.
At the same time, Hungary is constantly strengthening its cooperation with Western European countries. It joined NATO in 1999 and the European Union in 2004, fully integrating into the Western economic system. A large number of capitals from Europe, the United States, Japan and South Korea have poured into Hungary, and they have the right to speak in Hungary's automobile, electronics, chemical, food and other industries.
After the 2008 financial crisis, Hungary's economic and social problems came to the fore, and Hungarians began to reflect on the disadvantages of over-reliance on the EU. In 2010, political strongman Viktor Orban was re-elected prime minister of Hungary, initiating a controversial reform.
Viktor, who pursued pragmatism, insisted on proceeding from its own national interests, and on the premise of not leaving the European Union, formulated a strategy of "opening to the east", trying to find a balance between the East and the West. Especially after the Russia-Ukraine conflict, Hungary continued to buy a large amount of natural gas and oil from Russia despite the obstruction of the European Union.
Among Asian countries, China, which has the largest economy and the strongest willingness to go to sea, has become Hungary's most important partner for cooperation.
China's new energy industry is pouring into Hungary
So how close is the economic and trade cooperation between China and Hungary? There are several sets of data that can be glimpsed into a thing or two.
In 2023, bilateral trade between the two countries exceeded $13 billion, and China has become Hungary's largest trading partner outside Europe.
In 2023, China's direct investment in Hungary reached 7.6 billion euros, accounting for 58% of the total foreign direct investment in Hungary. Hungary has been China's No. 1 investment destination in Central and Eastern Europe for many years.
Among them, the new energy vehicle industry has become the focus of Sino-Hungarian cooperation in recent years. Someone has given Hungary a nickname: the bridgehead for China's new energy to enter Europe. In other words, Chinese companies such as BYD, NIO, and CATL flock to the European market, and the first stop is generally in Hungary.
In 2017, BYD's Hungarian electric bus plant was completed and put into operation, and its products are not only supplied to Hungary, but also exported to Western European countries such as the Netherlands and the United Kingdom.
BYD electric buses
In September 2022, NIO's Energy Europe plant project in Hungary went into production. This is the European manufacturing center, service center and R&D center of NIO's power-up products, providing battery swap stations for NIO's network throughout Europe.
In December 2023, BYD announced that it would build a new energy vehicle production base in Szeged, Hungary, which will be built in phases with a total investment of several billion euros and will provide thousands of jobs in Hungary. This is also the first passenger car factory built by a Chinese new energy brand in Europe, which has strong demonstration significance.
In addition to automakers, Chinese battery factories and auto parts factories are also very optimistic about Hungary and continue to increase their investment in Hungary.
In August 2022, CATL announced that it would spend 7.34 billion euros to build a power battery plant in Hungary, covering an area of 221 hectares (an area equivalent to three Forbidden City), with a planned battery production capacity of 100 GWh (which can assemble more than 1 million electric vehicles). This project is the largest investment in Hungary's history and may be the largest battery plant in Europe.
In 2023, second-tier battery manufacturers such as EVE and Sunwoda officially announced their plans to build factories in Hungary. Even Chinese companies that make battery raw materials and battery production equipment, such as Huayou Cobalt, Enjie, Hangke Technology, Huashuo Technology, Zhenyu Technology, and Zhicanon, have also announced their Hungarian investment plans.
Image source: Xinfu Think Tank
According to estimates by Xinfu Think Tank, the total committed investment of Chinese EV industry chain companies in Hungary has reached 12.14 billion euros (equivalent to 6.74% of Hungary's GDP in 2023). Someone joked, "Chinese tram and battery companies are either setting up factories in Hungary or on the way to Hungary."
In June 2023, Szijjártó Peter, Minister of Foreign Affairs and Foreign Trade of Hungary, said at the 2023 World Power Battery Conference that benefiting from the local investment of Chinese battery manufacturers, Hungary's power battery production temporarily ranks fourth in the world and will soon rise to second in the world, second only to China.
Not only the new energy vehicle industry, but also China's banking institutions, telecommunications companies, infrastructure companies, home appliance companies, electronics companies, chemical companies, and equipment manufacturers are also heavily invested in Hungary.
When the United Kingdom, France and other European countries gave up signing 5G orders with Huawei, Hungary clearly supported Huawei, and the Hungarian Prime Minister visited Huawei's headquarters in a high-profile manner during his visit to China in 2023. With Huawei's support, Hungary has built the first 5G container terminal on the European continent.
While Europeans were still questioning China's high-speed rail technology, Hungary and Serbia threw an olive branch to China. The "Hungarian-Serbian Railway", which connects Hungary and Serbia, uses high-speed EMUs produced by CRRC. This is the first time that China's high-speed EMUs with a speed of more than 200 kilometers per hour have been exported to Europe.
Serbian section of the Hungarian-Serbian Railway
The 27 countries of the European Union, why choose Hungary
But there is a question: Hungary is neither the largest nor the richest of the 27 countries in the EU, so why do Chinese companies (tram and battery companies) prefer Hungary so much?
First, Hungary is well located and has access to a large market of 250 million people within a 600-mile radius. If Chinese companies set up factories in Hungary, they can save transportation time and reduce logistics costs.
Second, Hungary has a good industrial base and a relatively complete manufacturing industry. Taking the automotive industry as an example, 14 of the world's top 20 automakers have established vehicle factories and parts production bases in Hungary, and half of the world's 100 largest auto parts suppliers have factories or representative offices in Hungary.
In this way, Chinese new energy companies such as BYD, NIO, and CATL will be able to quickly organize production in Hungary without having to import parts from China.
Some people may say that Germany, France, and Italy should be chosen, and the automobile industry in these three countries is more perfect.
However, Germany, France and Italy are old developed countries, land prices are expensive, workers are paid well, and compliance costs are high. In contrast, the cost of setting up a factory in Hungary is lower.
In addition, there is resistance from some industries and social organizations in these countries. For example, in September 2023, the European Commission launched a countervailing investigation into Chinese electric vehicles.
In contrast, the Hungarian government has a much friendlier attitude towards Chinese companies. Hungarian Prime Minister Viktor personally led a team to China to attract investment, and met with Ren Zhengfei, Wang Chuanfu and other Chinese entrepreneurs.
Hungarian Prime Minister Viktor visited Shenzhen
Source: Financial Headlines
On March 14, 2024, Hungary announced that it would implement a facilitation arrangement for the issuance of five-year multiple visas to relevant Chinese business people. From this summer, Hungary will launch a direct flight from Budapest to Xi'an, the sixth direct flight between Hungary and China.
On May 10, China and Hungary issued a very important joint statement. One of the paragraphs reads: The Hungarian side appreciates the positive role played by Chinese enterprises in Hungary's national construction, welcomes more Chinese enterprises to invest in Hungary, and is willing to create a good investment and business environment for them.
According to this trend, more Chinese companies will go to Hungary to pan for gold in the future. As long as you look at the EU's market expansion plans, Hungary is an unavoidable issue.
The model of "Chinese brand + Made in Hungary + EU market" is worth looking forward to.
The author of this article | Rao Zufen | Editor-in-Charge | Xu Tao
Editor-in-Chief | He Mengfei | Image source | VCG