Hungary Aims to Remain a Key Destination for Chinese Investors

Minister of Economic Development Márton Nagy attended the 6th China International Import Expo in Shanghai. In his speech at the event, he stressed that Hungary rejects policies that support bloc-building, and strives for peace, cooperation, and connectivity between the West and the East, the Ministry of Economic Development said in a statement.

The Minister emphasized that “we are proud that Hungary is the number one destination for Chinese business investment in Central Europe. And the success of the opening to the East is shown by the fact that in 2023, more than one third (34 percent) of foreign direct investment (FDI) will come to Hungary from Eastern countries, while in 2010 it was only less than 10 percent.” As he said, Hungary is now building a complete electric car manufacturing ecosystem, with Eastern and Western companies jointly producing electric motors, batteries, solar panels, electric chargers, and cars.

Márton Nagy believes that the current total FDI stock of EUR 100 billion could double by 2030. Strong FDI inflows have three important advantages.

First, at the macro level, investment, production, and the country’s external trade will rise significantly.

By 2030, exports as a share of GDP could reach 100 percent while the country’s export complexity could remain among the world leaders, helping it to reach 90 percent of EU development by the end of the decade.

Second, at the micro level, the multiplier effect of FDI on the development of Hungarian firms is significant, both in terms of horizontal and vertical effects.

Horizontal integration means the interconnection of R&D activities, university cooperation, science, and innovation parks. Vertical integration through supply chains gives Hungarian companies the opportunity to move up the ladder by learning new, modern technologies, the minister explained. The government’s goal is to have an increasing number of Tier 1, i.e. top-tier Hungarian suppliers in the supply chains of factories operating in Hungary.

Thirdly, increased commercial activity could give a boost to the logistics sector.

The logistics sector currently accounts for five percent of GDP. This needs to be increased to 10 percent by the end of the decade. It is important that goods produced in Hungary are transported by Hungarian carriers, he added.

The minister noted that there are three prerequisites for the continued attraction of FDI and a successful economic policy based on it. Infrastructure needs to be further developed, sufficient and cheap energy needs to be provided, and an adequate and skilled workforce needs to be ensured.

In his opinion, the Belt and Road Initiative (BRI) is currently the most comprehensive project in world politics. Márton Nagy pointed out that although there are joint priority investments, such as the Budapest-Belgrade railway line, Hungarian participation in the BRI infrastructure development is low compared to other countries.

Therefore, Hungary should increase the size of infrastructure projects under the BRI to ensure that production and trade cannot be hindered by the strong inflow of Chinese FDI.

Nagy also held talks with the heads of ICBC, the world’s largest bank, on the occasion of the expo. During the meeting, he reiterated that Hungary not only wants to become an economic meeting point for capital and high-tech from the West and the East, but also a regional financial center. The government is committed to ICBC opening a branch in Hungary, given the significant business activities that the Chinese bank already carries out in Hungary.

The minister underlined that Hungarian-Chinese relations have developed significantly in recent times, with a high-level delegation visiting China in mid-October, during which several cooperation agreements were signed, including with ICBC, under the leadership of Prime Minister Viktor Orbán.

Via MTI, Featured image: Wikipedia