Chinese Investment and Cooperation Enjoys Sound Momentum in Hungary

By Audrey Guo,Wu XueYan(Intern)

This year marks the 73rd anniversary of the establishment of diplomatic ties between China and Hungary. In a recently held seminar titled “Going into Hungary”， consul general of the Hungarian consulate general in Shanghai Szilard Bolla said， as the first European country signed intergovernment cooperation documents with China about promoting construction of the Belt and Road， Hungary keeps deepening political mutual trust with China， and closer economic and trade cooperation is conducive to business investment and trade between the two countries.

China-Hungary trade and economy has been surprisingly on the rise

In recent years， China-Hungary trade and economy has been surprisingly on the rise and achieved diversified development in projects， investment and cooperation， demonstrating the strong stability and abundant potential of bilateral economic and trade relations. Bilateral trade has increased in quality and efficiency instead of declined. In 2020， a total of 10 Chinese projects were launched in Hungary， making China as the largest source of foreign investment in Hungary for the first time， and ChinaHungary cooperation projects have kept evolving. The Hungarian Foreign Minister and other senior officials have publicly welcomed Chinese investment on many occasions. fields such as the Hungry-Serbia Railway， Huawei 5G and new energy.

“Despite the global impact of COVID-19， Chinese investment in Hungary continues to grow and remains the top investment destination for China in central and eastern Europe，” Bolla said.

In the first quarter of 2021， bilateral trade increased by 64.7% year-on-year， demonstrating tremendous resilience and potential. The successful launch of direct cargo flights between Zhengzhou， Ningbo and Budapest has built an “air bridge” for bilateral economic and trade exchanges amid the pandemic， which greatly enhanced Hungary’s status as a logistics hub in the region.

According to statistics from the China Economic Research Institute， the import and export volume of bilateral goods between China and Hungary from January to August of 2021 stood at USD 10，188.61 million， an increase of USD 2，698.9564 million compared with the same period in 2020， with a year-on-year growth of 36.5%. Hungary is now the largest destination of Chinese investment in central and eastern Europe， accounting for more than 50% of the total.

Bolla said， “at present， Chinese investment and cooperation maintains a favorable situation and development momentum in Hungary with great potential and promising prospects. Since 2015， Chinese investment in Hungary has reached more than USD 4.2 billion.”

China is now Hungary’s fourth largest trading partner and second largest source of imports in the world. There is much room for bilateral cooperation in financial infrastructure construction， economic and trade cooperation， park construction and high & new technology. On November 18， 2021， the Ministry of Commerce of China and the Ministry of Innovation and Technology of Hungary signed two MOUs on strengthening investment cooperation in green development and digital economy to promote high-quality development of bilateral investment cooperation and deepen bilateral economic and trade relations.

A batch of projects have settled in Hungary

At present， Hungary is China’s largest investment destination in Eastern Europe， accounting for more than 50%. According to Xin Fujun， director of “going global，” so far a number of key enterprises and projects have been established in Hungary， including the Hungry-Serbia Railway， Kaposvar 100-megawatt solar power station project by the China national machinery import and export group， BYD electric buses， CRRC-Icarus dual brand new energy electric buses， continuously driving the sustainable growth of ChinaHungary trade and economic cooperation.

Hungary has been implementing the“Opening to the East” policy， which is in line with the Belt and Road Initiative. Many Chinese enterprises have invested their economic and trade cooperation projects in Hungary， which has boosted bilateral trade. In 2020， 13 Chinese enterprises set up representative offices， subsidiaries or branches in Hungary， accounting for 20% of all members of the Chamber of Chinese Enterprises in Hungary.

“Currently， Alibaba， Huawei， Lenovo and investors from Guangdong， Shanghai， Anhui and investors from many Chinese provinces have all started investing in Hungary. In the year of 2020 alone， a total of 10 Chinese-funded projects were launched with an investment value of EUR 664 million. By the end of 2020， China had invested more than USD 5.5 billion in Hungary， accounting for half of China’s total investment in central and eastern Europe and creating 23，000 jobs，” Bolla said.

In 2020， Lenovo announced an investment of about USD 27 million to build its first European factory in Hungary. Nanjing Chervon Auto Precision Technology Co.， Ltd. invested more than EUR 60 million to set up the world’s first overseas subsidiary in Hungary and build a European production base for intelligent auto parts manufacturing. Shanghai Semcorp New Material Technology Co.， Ltd. invested EUR 183 million to build a 97，000 square meter lithium battery isolating film factory in Hungary. Wanhua Borsod Chemical Company increased its capital by USD 39.61 million to start new projects； Shenzhen Kedali Industrial Co.， Ltd. invested about USD 48 million in a lithium battery parts factory in Hungary.

According to Shi Hengguang， Director of overseas projects of Semcorp， Debrecen was finally selected as the first overseas investment destination by Semcorp after extensive investigation and research. The construction of this project will further accelerate the overseas market development and global layout of the company’s lithium battery diaphragm business， which will further enhance the company’s international influence.

Semcorp has invested a lithium battery diaphragm production base project in Hungary， which is located in Debrecen south industrial park. With a total investment amount of EUR 183 million and four lithium battery diaphragm production lines， the project provides 440 jobs locally， which earned the title of investor of the year 2020 by the Hungarian ministry of foreign affairs and economic affairs as well as the Hungarian National Investment Bureau. The Hungarian government has provided HUF 13.5 billion （about EUR 38.6 million） for the project.

In addition， after being acquired by Wanhua Group， Borsod Industrial Park has developed from being on the verge of bankruptcy into being one of the top five enterprises in Hungary in just a short period of time， and won a series of honors such as the Hungarian Corporate Social Responsibility Award and the Best Social Responsibility Employer Award.

Previously， in an interview with the media， state secretary of the Hungarian international communication and relationship Kovac Zoltan said that during the COVID-19 pandemic， Chinese enterprises actively fulfilled social responsibility， conducted multilateral financing and procurement of pandemic prevention materials， and took concrete actions to support pandemic prevention and control work in central and eastern European countries. The Chinese enterprises worked together with the local people to overcome difficulties. “In the joint fight against the pandemic， the sense of responsibility and friendship shown by Chinese companies has been very touching. Hungary is ready to continue to deepen practical cooperation with China under the framework of jointly building the Belt and Road and China-Central & Eastern European Countries cooperation，” he said.

Overseas investment will gain greater momentum

According to the Central Bureau of Statistics， Hungary’s total GDP was HUF 55 trillion （about EUR 158.18 million） in 2021， up 7.1% year-on-year and up 2.1% from 2019. On the supply side， the service sector contributed 3.6%， industry 1.9% and agriculture 0.1% to GDP growth. On the demand side， consumption contributed 3.1% to economic growth and trade surplus 1.7%. Consul Bolla said that since the COVID-19 pandemic hit the world in 2020， Hungary has remained a promising region for continued growth and investment in Europe， and this momentum will be even stronger in 2022.

According to Rupert Varnay， President of Kaithai Group， as a member of the European Union， Hungary enjoys a favorable geographical location， prominent regional superiority， a stable political situation， sound laws and regulations， perfect infrastructure， an open financial market， a cost-effective labor force and a favorable investment environment. Hungary is not only a safe investment destination， but also has a large number of skilled technical personnel.

Hungary’s 9% corporate tax rate is currently the lowest in Europe. At the same time， Hungary encourages foreign investment and has formulated a series of preferential policies covering a wide range of domains， including tax incentives， employment subsidies， training subsidies， and special subsidies provided by the Hungarian government or the EU. Under Hungary’s preferential investment policy， companies can receive investment subsidies of up to half of their total investment. Hungary provides refundable and non-refundable subsidies to enterprises that invest in Hungary or expand investment in the country， and offers national treatment to foreign investment without special subsidy policy. Depending on the investment projects， the subsidies mainly take the form of cash subsidies， tax incentives and low-interest loans， among which the cash subsidies come from the Hungarian government or EU funds. Hungary’s subsidy policy is in line with the EU law.

“Like Hungarians， people from other countries can also establish economic entities， enjoy national treatment and have a choice of various forms of enterprise，” Rupert Varnay points out. In addition， he said that the automotive industry， machinery， electronics， information and communication， life sciences， food industry and renewable energy are the most potential investment sectors in Hungary.

The Chinese Embassy in Hungary advises companies that plan to carry out investment cooperation in Hungary to strictly abide by the local laws and regulations， fully conduct preliminary research work， understand the local political and economic policies， laws and regulations， tax， labor， environmental regulations， and well conduct risk avoidance and management， trying to avoid all kinds of investment risks. Chinese enterprises are supposed to do a good job in follow-up management of investment， including selecting professional personnel， strengthening localized management， making good use of government support policies and actively fulfilling corporate social responsibilities to maintain sustainable development of the investment projects.