Is it worth making friends with China? - has become one of the most important questions of our decade. As geopolitics permeates economic processes, mistrust is growing at all levels of relations. The United States and some of its European and Asian allies see cooperation with China as risky, and are therefore downgrading their relations. Although this thinking dominates public opinion, in reality most countries are trying to balance the interests of the great powers.
Hungary belongs to the latter camp. While the 2010s were dominated by the 16+1 Cooperation, which stimulated relations between China and the Central and Eastern European region (CEE), the process took the opposite direction after covid. Hungary remains the only EU member state in the region to consistently build its relations with China.
With the great power rivalry in an escalation phase, it would be premature to put a price on friendship with China. It is not clear whether the Asian country's economy will provide sustainable long-term development for the Hungarian industry that will be linked to it, nor what the political and financial consequences of confronting US interests will be.
However, investment trends suggest that the Hungarian policy is the right one. The inflow of capital from the East is so significant that it gives the Hungarian economy new positions in international value chains. In the last 20 years, Chinese capital has largely flowed to Western countries, but since the epidemic, investment in the EU has fallen. Chinese working capital inflows fell by USD 7.5 billion to 2010 levels last year, but 78 per cent of this was in the EV sector. This new trend in the automotive sector puts Hungary in the same league as Germany and France, which are interested in the Chinese EV industry, as our economy received 44 per cent of Chinese working capital into the EU last year.
Between 2005 and 2024, Hungary attracted 9.26 billion USD worth of Chinese capital, almost double the amount of Chinese working capital coming into the other three Visegrad countries, Poland, Czechia and Slovakia. Poland is the largest economy in the region, and the 2.61 billion USD that went there in this period is not even equal to the 3.78 billion USD invested in the CATL battery factory in Debrecen.
Meanwhile, trade between China and Hungary has more than tripled in the past decade, from 3.3 billion USD in 2014 to 10.3 billion USD by 2023. Although it has a high deficit of 8.5 billion USD, the Hungarian economy also benefits from Chinese imports. Our leading exports are automobiles and parts from machinery manufacturing, which are part or end products of global production chains. This includes both Chinese investment and imported goods, which help Hungarian industry to take up new positions in the global economic bloodstream.
The author is a researcher at the Hungarian Institute of International Affairs