Prime Minister Viktor Orban of Hungary will host Chinese President Xi Jinping on a three-day visit starting Wednesday. Xi knows Orban’s utility.
He knows that the European Union, of which Hungary is a member, will almost certainly impose large tariffs against Chinese EV imports. In turn, China will make significant new investments in Hungary. This will allow Xi to skirt tariffs by having Chinese goods shipped from Hungary to the other countries of the Union. EU states are not allowed to put tariffs on another member state’s exports. Xi will sign multiple economic agreements including funding for two electric vehicle manufacturing plants and one EV battery plant. China’s BYD, the world leader in EV production, will open its first European EV production factory this year in southern Hungary.
On Monday, it was confirmed on Hungarian state television that Xi and Orban will announce that China will build a second EV plant in Hungary. This plant will be run by China’s Great Wall Motor. Prescient Hungarian vehicle dealers are already deemphasizing European vehicles and focusing on Chinese models. In addition, China is financing an $8 billion EV battery plant that will be Hungary’s largest foreign direct investment. The goal is to make Hungary a world hub of EV battery manufacturing.
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Hungary is a small country with a population of only 10 million. By World Bank standards, it is a wealthy country. The GDP of Hungary is minuscule, totaling just over 1% of that of the U.S. Still, the economy should grow by 2.4% this year. By European standards, Hungarians are relatively prosperous. They are culturally conservative with strong family values. But as time passes, Hungary will feel the bite of being isolated from Western Europe.
Orban’s natural kinship with Communist China is unsurprising. After all, he also supports Russia in its aggression against Ukraine. Orban is illiberal and corrupt, but he’s also foolish. Russia faces a demographic and economic implosion. Orban has chosen unwisely by his embrace of authoritarianism. Hungary has chosen to be the gateway for China into Europe. He will sacrifice sovereignty in return for communist gold.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note.
