Xi Touts China-Hungary Relations as a Good Blueprint for Europe

(Bloomberg) -- President Xi Jinping pledged more rail and energy investments in Hungary to serve as China’s gateway into the European Union as he secured backup from Prime Minister Viktor Orban for Beijing’s pushback against the “overcapacity” accusations by the West.

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Xi, in Budapest Thursday after stops in France and Serbia, brought pledges to build infrastructure that will help spread products across the trading bloc from Chinese factories planned in the eastern European country. Hungary’s cash-strapped government has been looking to lock in financing and fresh stimulus for its economy on top of billions of dollars from Chinese companies committed in recent years, mostly in the electric vehicle industry.

The Chinese leader has been urging Europe to work with him to overcome trade tensions that threaten to derail a global economic recovery, holding up Hungary as an EU member where Beijing has managed to create a strong relationship. “We’ll strengthen cooperation in our development strategies, deepening ties in trade, finance and our economies,” Xi said at a joint press conference with Orban.

“Hungary does not identify with the rhetoric of so-called overcapacity or de-risking,” a Chinese official readout cited Orban as saying during his talks with Xi. “Hungary’s determination to deepen cooperation with China is unswerving and will not be interfered by any force.”

The EU is becoming tougher on trade relations with China, echoing US concerns about state-fueled overcapacity in the green industry. That rhetorical shift was already put into practice with the launch of a probe into subsidies for Chinese electric vehicles in the fall of 2023. The bloc followed up last month with a separate investigation into procurement of medical devices.

Hungary has gone all-in on economic links with China under Orban’s leadership. BYD Co., the Chinese EV giant, picked Hungary as the site of its first European car factory, edging out the likes of Germany and France, which had also coveted the investment. Hungary is also a hub for car battery producers, with China’s Contemporary Amperex Technology Co. Ltd. currently building a €7.3 billion plant in the eastern city of Debrecen.

The meetings in Budapest honed in on expanding China’s economic footprint, much as they did in Serbia, Hungary’s southern neighbor. The costly upgrade of an aging rail network and the construction of a long-delayed connection between Budapest Airport and the capital’s downtown featured among the agreements, according to Foreign Minister Peter Szijjarto.

The comments coincide with growing tension between Beijing and Brussels, with Western European leaders accusing Xi’s government of flooding their markets with cheap exports that threaten jobs. Xi’s support for Russia despite its war in Ukraine has thrown the relationship further off balance.

The investments in Hungary would complement a multi-billion dollar rail track modernization between Belgrade and Budapest that’s under construction as part of the Belt and Road Initiative, China’s global infrastructure project. Hungary is the only EU nation that’s still a part of the initiative.

Orban has frequently clashed with the US and the EU over the rule of law, as well as close ties to Russia and China, and has rejected Western pressure to reduce links with Beijing or to back a more critical approach on trade and human rights. One particularly sensitive area is telecommunications, where the US has alleged Huawei Technologies Co. poses a national security risk for countries using its equipment.

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Huawei and 4iG Nyrt., which Orban is grooming to become Hungary’s national champion in the telecom sector, will sign a joint statement on Friday, the Economy Ministry said in an emailed invitation. Minister Marton Nagy has said there was a need to deepen cooperation with Huawei to advance digitalization in the country.

During his earlier stay in Belgrade, Xi bolstered economic and political ties with another country that’s thrown open its arms to Chinese trade and investment. He signed a free-trade deal with Serbian counterpart, Aleksandar Vucic, who expects infrastructure investment with Chinese support worth as much as $27 billion.

Xi started his tour of Europe in France, where he held talks with President Emmanuel Macron as the EU takes a tougher stance on China’s perceived national security risks. Xi also met European Commission President Ursula von der Leyen, who told him that the EU is prepared to deploy all tools available to defend its economies if China fails to offer fair access to its markets.

--With assistance from Marton Kasnyik, Li Liu and Jenni Marsh.

(Updates with more details from Xi-Orban talks in Budapest)

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