On the 1st of October, Hungarian Prime Minister, Viktor Orbán sent a letter of “greetings of friendship” and “best wishes” to the Premier of the People’s Republic of China, Li Keqiang. [HungaryToday]. In his letter, the Prime Minister also expressed that the two countries’ friendship is solid, “despite the growing international challenges” concerning the perception of China in the West. Additionally, Mr Orbán also emphasised that the strategic partnership between China and Hungary, the 17+1 cooperation between China and Central and Eastern Europe, and the Belt and Road Initiative showed the success of this cooperation. [Hirado.hu]
Chinese FDI stock (excluding special purpose entities) has increased by over 300% between 2012 and 2019. [MNB]
Caption: Chinese FDI in Hungary since 2008 (excluding special purpose entities)
The initial increase in FDI around 2012 is not a purely Hungarian phenomenon. From Mercator Institute for China Studies’ analysis, we can see that at the beginning of the 2010s, Chinese investment has grown rapidly. [Merics] In the 2016-2019 years, the Chinese FDI position in Hungary has mostly stagnated. This highlights a more global trend as, during this period, annual Chinese FDI in Europe has decreased substantially. According to Andrew Holt, citing Merics’ and Rhodium Group’s analysis, the main reasons for the decline was capital control and lower liquidity in the Chinese financial system. However, he argues, growing political backlash against Chinese commercial presence has also played a major role in it. [IRMagazine]
Content: Chinese FDI in the EU fell further to a 5-year low
However, regardless of some positive achievements in the mid-2010s, several Central and Eastern European countries seem to be dissatisfied with the level of Chinese investment. As the South China Morning Post argued, 75% of Chinese FDI was concentrated in only 4 countries: Hungary, Poland, Czech Republic, Slovakia. [SCMP]
Ultimately, these trends show that Hungary is an important destination of Chinese investment and Central and Eastern Europe, but, according to MNB’s statistics, China still invests far less in Hungary than other major Asian economies like Japan or South Korea.
Main Chinese-owned companies in Hungary include: Huawei, Lenovo, ZTE, Wanhua, Cervon Auto
China’s Chervon Auto announces major investment in Hungary
The Chinese company, Chervon Auto, is investing 17.5Bn HUF (48 million EUR) into a new factory in Miskolc, Hungary, making it the company’s first facility outside of Mainland China, reported by hvg.hu. [hvg.hu] The new project will be partially subsidised by the government, with HUF 5.3Bln (EUR 14.5 million).
Content: Péter Szijjártó negotiates with China’s Chervon Auto
According to the Foreign Minister of Hungary, Péter Szijjártó, this investment will create 138 new jobs in the region. The minister emphasised that Hungary intends to have a major role in the global production of vehicles, even in the new age of electric cars. The new facility, when it is fully operational, will be able to have an output of 2 million vehicle parts, supplying electric- and conventional car manufacturers.
As we reported in a previous article, Chinese investment has been on the rise since 2012, totalling around EUR 137.5 million in 2019. While the trend shows growth, Chinese investment is still small compared to other Asian countries like Japan or South Korea. So far, we do not have sufficient data to know how the Covid-19 pandemic or geopolitical tensions will influence investments coming from China. However, a recent New York Times article suggests that China’s economy shows signs of rapid recovery, which could have a positive impact on Chinese foreign direct investment (FDI) in Hungary. [TheNewYorkTimes]
Huawei opens its third R&D centre in Hungary
Huawei opened its third research centre in Hungary, creating over 100 new engineer jobs. On the 20th of October, the Hungarian Foreign Minister Péter Szijjártó announced that the new research facility will focus on artificial intelligence streaming, image processing, and signaling technologies, as well as extremely large distribution systems. [BBJ]
Content: Huawei building photo
At the same time, Huawei also celebrated its 15th anniversary in Hungary and 20th anniversary in Europe. Colin Cai, CEO of Huawei Hungary, said the company directly or indirectly employs around 2400 people in Hungary and invested around 1.5Bln USD (approx.: 1.25Bln EUR) in the country. Hungary also hosts the largest supply centre outside of China, serving over 50 countries. [Huawei]
While the company faces criticism for its political connections with the Chinese Communist Party, it has not stopped investing in European countries. One of these investments was announced in France, in February, this year. The company plans to invest around 200 million EUR to build a mobile base station plant, which would be the company’s first manufacturing plant in Europe. [Reuters]
China’s Semcorp will set up its new plant in Debrecen
Shanghai-based Semcorp is investing HUF 65.5Bln (approx.: EUR 180 million) into its new plant in Debrecen, announced by the Minister of Foreign Affairs and Trade Péter Szijjártó. [BBJ] The company’ new plant will be making separators for electric vehicle batteries. According to 24.hu, the plant construction is expected to start in the second quarter of 2021, and the facility is expected to start production in the first quarter of 2023.
The company currently operates 5 facilities, this will be the 6th and also the first one outside of China. Semcorp, officially known as Yunnan Energy New Material Co. Ltd. is the world’s largest supplier of lithium-ion battery separation film (LiBSF), supplying LG, Samsung and Panasonic among others. [24.hu]
Content: Semcorp facilities in Zuhai, China.
According to Mr Szijjártó, the new facility will create 440 new jobs in the region and the company will receive a HUF 13Bln grant from the government to complete the project. The Minister said that the company chose Hungary from 3 other European countries which also competed for the facility. [HungaryToday] With this investment, the all time Chinese foreign direct investment (FDI) in Hungary is expected to exceed EUR 4.2Bln. Currently, there are around 15 000 people, employed by Chinese-owned companies in Hungary.
