Hungarian Investment Promotion Agency

China has gained global leadership in a number of key areas in recent years: the Asian giant is the global leader in 57 of the 64 critical technology ecosystems identified so far. This has sparked a sense of repulsion in the political leadership of the European Union, which is no longer only attacking these development, but also wants to slow them down by increasing control over capital inflows, in addition to trade restrictions. However, European economic players and rational-minded businesspeople seem to have a very different view of Chinese capital.

In September, at the invitation of Chinese President  Xi Jinping, Hungary was the guest of honour at CIFIT (China International Fair for Investment & Trade), one of the country's most important investment and trade fairs, where we experienced what we encounter here in Budapest at HIPA's headquarters at the weekly meetings with business and political delegations: representatives of a country with a territory 103 times larger than ours and a population of 1.4 billion negotiating with us at eye level and on the basis of mutual respect.

Our country has become one of Beijing’s most respected partners, and Chinese investors regard us as the No. 1 investment destination in Eastern-Central-Europe. In terms of the volume of the projects registered in HIPA’s investment promotion system, China was the largest investor in Hungary in both 2020 and 2023.

Last year, Hungary attracted 44 percent of all Chinese direct investment in Europe.

It is important to note that, contrary to popular belief, it is not only the battery and the automotive industry where Hungary is appealing.

Some of the recent, but perhaps little known success stories include an R&D center in Budapest run by Huawei, one of the giants of the telecom world; a new production site and a global R&D hub by Wasion, one of the leading manufacturers of smart electricity meters; a decision taken in May by Fiberhome, one of China's most famous infocomms companies to set up its largest European operation in Kisbér, and the first Chinese investment in the field of biotechnology is also in the pipeline.

Yet part of the mainstream media and the political leadership of the European Union are still complaining, as geopolitical considerations are increasingly at the forefront of investment decisions. There is a growing number of articles and political statements about Hungary having chosen the wrong path in opening its doors to China. But instead of public uproar, it would be worth taking a step back and looking at the evolution of investment over the past 25 years.

Until the early 2000’s, Chinese companies invested only sporadically abroad, but Beijing’s the so-called ‘going out’ strategy has led to radical changes in the global stock of foreign direct investment (FDI), and Chinese companies have moved from their peripherical position into he center and became global leaders even in industries requiring the latest technologies.

According to data from UNCTAD, China had a negligible share of FDI at the turn of the millennium, but in 2023 it accounted for around 7 percent. It is the most powerful countries which gained the most by this breakthrough; the United States has currently the highest stock of Chinese capital, followed by the European trio of the UK, France and Germany, which accounts for more than 50 percent of Chinese FDI since 2000.

It is important to note that the Asian superpower has not only gained positions through greenfield investments, but also through acquisitions. Acquisitions fully dominated the 2010s, the years in which the Chinese takeover of advanced European economies was the most pronounced and to which no one objected. In the last ten years, Chinese companies have invested in almost 1,900 companies across Europe, including some 400 in Germany.  

The pace of concluding deals is not slowing down: the latest figures show that Chinese investors acquired nearly 170 companies in the five major European target countries alone in the period 2022-2023. 

It is typical, that the attention of Chinese investors is increasingly turning from traditional industries to high-tech sectors. This is evidenced by the most significant transaction of 2022; Wuxi Xichan Microchip Semiconductor acquired the Dutch company Ampleon, a key player in the semiconductor industry, for almost USD 2 billion. The pharmaceutical industry has also been affected by these transactions, with Fosun acquiring France's Cenexi and Huadong Medicine Investment Holding becoming a major shareholder in Germany's Heidelberg Pharma. In the greenfield sector, the investment in the French battery manufacturer AESC and the Irish data centre operator ByteDance - the company that operates TikTok - stand out.

Events in recent years have clearly shown that market participants view Chinese capital through a very different lens than the European Commission. A recent example to that is the joint venture between China's Leapmotor and Stellantis, that builds on the European partner’s global resources and 130 years of experience and has just announced two new models in September.

It is clear that Chinese investment capital is a useful tool, and it is seen by many European players as a practical opportunity. This is also the view of Hungary.

The European Union should also focus on developing cooperation, as companies from the West and the East can become even stronger and more competitive by joining forces. Hungary, pursuing the strategic goal of economic and investment neutrality, wishes to be at the forefront of this process.

And what is our task for the years ahead in terms of investment?

We need capital from both the East and the West, especially in the form of investments in cutting-edge technologies. We need to broaden our investment cooperation with China to new industries and sectors. We are proud of what we have achieved with Asia in electronics or in the automotive sector, but the range of opportunities is much wider: biotechnology, composite technology, software development, testing and engineering centres, robotics, factory automation, new alternative propulsion technologies, and so on.

Moreover, for those who are already here in our country and started or will start production, is also an important objective to move up the value chain, to start research and development cooperation with our educational institutions, to integrate domestic suppliers into their value chain, and to establish their European headquarters for sales, financial, legal, IT services and development in Hungary.

The task is gargantuan, but as recent examples show, the direction is right. CATL and EVE Power in Debrecen have started cooperation with the University of Debrecen, BYD and the University of Szeged are developing their relations, and Huawei has for several years been working closely with Széchenyi István University in Győr and Óbuda University in the field of education. BYD sent a delegation of 44 procurement experts to Hungary to discuss cooperation with 112 domestic companies at a supplier forum organised by HIPA.

But to not avoid answering the question in the title, there is only one thing wrong with Chinese capital: there is not enough of it.

HIPA is ready for new challenges.