1. Hungarian – Chinese relations have entered a new golden age
When the People’s Republic of China was established on October 1, 1949, and the news reached Hungary, the Hungarian government immediately recognized the New China on October 4. Diplomatic relations were established on October 6, which was significant for China at that time as it struggled for recognition and was only recognized by nine states during its first month, including Hungary. Official relations between Hungary and China date back even further. The Qing Empire and the Austro-Hungarian Empire entered into a treaty relationship in 1869, followed by the establishment of an Austro-Hungarian consulate in Shanghai and an embassy in Beijing in 1897, with China sending an envoy to Vienna in 1902. Relations between the People’s Republic of China and Hungary were particularly friendly in the 1950s, with numerous treaties signed and several high-level visits. Relations cooled off due to the deterioration of the Sino-Soviet relationship, with Hungary under Soviet influence, but the Hungarian government always tried to smooth tensions and maintain communication channels within the narrow leeway allowed by the Soviets. From the late 1970s, Hungarian-Chinese relations flourished again with new treaties signed and reinforced by high-level visits. Following the change of the political systems in Central and Eastern Europe, Hungary’s focus shifted towards Euro-Atlantic integration, giving less attention to China, but since the 2000s, Budapest has consciously aimed to diversify its relations, bringing China back into focus. Since the 2010s, Hungarian-Chinese relations have entered a new golden age.
2. Hungary and China both emphasize the importance of global connectivity against the return of bloc formation
The global financial and economic crisis that began in 2008 revealed many of the problems of the Western world, and the Hungarian government then made an open commitment to diversify its relations and reduce its unilateral dependencies. This led to the announcement of the “Opening to the East” in the early 2010s, followed by the “Opening to the South”—later developing organically into the Hungarian connectivity strategy. China was one of the main focal points of these initiatives from the very beginning. It was exactly in the 2010s that China announced its international initiatives, which Hungary was able to join. The Hungarian and Chinese strategies for relationship-building have thus met, and the two countries share a similar view on international connectivity and the importance of maintaining and further developing global connections. For instance, in 2013, when President Xi Jinping announced the Belt and Road Initiative (BRI), Hungary—recognizing the coincidence between the BRI and its own “Opening to the East” policy—was the first EU country to announce its intention to join. Of course, China and Hungary are not comparable in size, global influence or power, and their geographical distance is huge, but they share similar views on the importance of non-ideological relationship building. This creates a good basis for developing bilateral relations and cooperation in international forums.
3. Beyond politics and economics, Hungarian-Chinese relations have deepened in cultural and people-to-people exchange
The current strong political and economic ties between Hungary and China do not exist in a vacuum but are built on stable cultural foundations. Since the 1950s, Hungarian studies have been offered in China and Chinese studies in Hungary at universities, with traditional and modern literary classics of each country available in the other’s language. Tourism links are extensive, with several hundred thousand Chinese tourists visiting Hungary annually. Hungary hosts the largest Chinese community in Central and Eastern Europe, numbering about twenty thousand people. Numerous state initiatives also support cultural and educational relations. In Hungary, no fewer than five Confucius Institutes operate (in Budapest, Szeged, Miskolc, Pécs, and Debrecen), and a unique Hungarian – Chinese bilingual primary and secondary school operates in Budapest. This year, the Chinese Cultural Center will open in the Hungarian capital. Since 2013, a Hungarian cultural institute named after Franz Liszt has been operating in Beijing. Each year, several hundred Hungarian university students study in China and Chinese students in Hungary, through various state programs or privately. Three Hungarian universities offer Chinese programs, and a dozen Chinese universities offer Hungarian studies. The training of professionals knowledgeable in the language and culture of the other country, however, is not keeping pace with the rapid development of economic relations. Hence the shortage of such professionals is a bottleneck in further investments and joint projects. This challenge can be mitigated with additional state training and scholarship programs.
4. Investment by Chinese companies in Hungary has shown significant growth in the recent period
In recent years, Asian companies have accounted for an increasing share of foreign direct investment (FDI) inflow to Hungary. Within this metric, investment by Chinese firms has shown significant growth in the recent period, with China being the number one foreign investor in terms of the volume of newly announced FDI projects in both 2020 and 2023. This trend is mainly due to the emergence of new electric vehicle value chains in Europe, as Asian companies in the sector have started to establish their manufacturing footprint on the continent. In recent years, newly announced Chinese projects linked with electromobility have included CATL’s battery production plant in Hungary and BYD’s plans to set up its first European factory in our country. The growing role of Asian investors, particularly Chinese investors, contributes to the diversification of the Hungarian FDI stock, reducing Hungary’s exposure to Western economies. It is important, however, to stress that altogether Hungary is still deeply integrated into European value chains and Western investors will remain key players in the Hungarian economy. As for the future, it is in the fundamental interest of the Hungarian economy that investor companies should also locate high-value manufacturing and research and development activities in Hungary. Cooperation with Chinese companies operating in our country should develop in this direction. Besides, it remains to be seen whether the recent surge of Chinese FDI inflow will lose momentum once the new supply chains of the European electric vehicle industry are created. Expanding the Hungarian operations of Chinese manufacturers through less capital-intensive but R&D-related projects could be an adequate response to offset a potential downturn in new FDI inflow.
5. Trade relations: Hungary is charting a path based on connectivity rather than de-risking
China is becoming an increasingly important trading partner for Hungary. Our main export products are wine, medical devices, and pharmaceuticals, but the relationship with China goes beyond the impressive export/import data. Due to structural transformation in the international economy, the significance of imports from China is also continuously growing. The role of complex, global value chains (GVCs) in the international economy is becoming increasingly important, allowing smaller countries to gain key market positions. Hungary is an important production center in machinery manufacturing; therefore, automobiles and car parts compose most of our national exports. Chinese products are appearing in these sectors at an increasing pace, thus strengthening Hungary’s position in the global economy. This market trend interprets strategies known as decoupling and de-risking. Western governments see risks in the globalization of the international economy and the development of interdependency. Trying to protect their positions in international value chains, they attempt to push emerging countries, primarily China, out of GVCs. Hungary, however, is interested in maintaining this trend. The government has based the national economy on the expanding role of GVCs, thus aligning its interests with other global players with the same emphasis, including China.
Written by Viktor Buzna, Péter Goreczky & Gergely Salát