Hungarian Prime Minister Viktor Orbán's uncoordinated trips to Moscow and Beijing, which he has referred to as 'peace missions', have acutely irritated the EU leadership. Under the flag of the EU presidency, Orbán is engaged in diplomacy that goes against the official line of the union. The conflict between Hungary and the EU has escalated to a new level, resembling an open rebellion.
However, the issue is much broader than diplomatic disagreements. Hungary is actively sabotaging the European strategy of de-risking relations with China and is reaping direct benefits from this.
The European de-risking policy aims to reduce dependence on Chinese imports and the monopolisation of certain sectors amid deepening political divergences with China. Meanwhile, the lion's share of investments by Chinese companies in Hungary is tied to the production of electric vehicles – one of the key sectors in which the EU seeks to protect its own companies.
Just as countries in the Global South benefit by not joining Western sanctions, Hungary benefits by sabotaging Europe's risk mitigation strategy. And while the EU aims to reduce dependence on China, Orbán says that attracting Chinese direct investment will reduce Hungary's 'dependence on Western capital markets'.
Hungarian Prime Minister Viktor Orbán's meetings with Volodymir Zelensky, Vladimir Putin and Donald Trump, which he has called 'peace missions', have irritated European Union leaders so much that they are discussing the possibility of ending Hungary's presidency of the EU Council early, German publication Table.Media has reported, citing sources in Brussels. Table.Media's interlocutors stipulate that the probability of this scenario is low, but the very fact of such a discussion is unprecedented. Most likely, the punishment for Hungary will be the cancellation of the traditional visit of the European Commission members to the capital of the presiding country.
The Hungarian Prime Minister is not acting in accordance with the agreed position of the Union, but in spite of it. Orbán's delegation used the special logo of Hungary's presidency of the Council of Europe. Vladimir Putin stated that Orbán arrived in Moscow specifically as a representative of the EU. EU diplomacy chief Josep Borrell, European Council President Charles Michel, and German Chancellor Olaf Scholz were forced to declare that Orbán 'in no way' represents EU interests and is acting on his own initiative.
The nature of the meetings held by Orbán contradicts the stance taken by Ukraine's allies. During negotiations with Orbán, Xi Jinping stated that China 'actively promotes peaceful resolution', but for a ceasefire to occur, other countries need to act just as 'positively'. Meanwhile, the communiqué of the 75th anniversary NATO summit condemns China not only for inaction but for supporting the Russian invasion. Furthermore, China is labelled in the document as a source of 'systemic challenges to Euro-Atlantic security' in cyberspace and outer space. Providing Xi Jinping with a platform to speak on the eve of the NATO summit could have been Orbán's main goal during his visit to China, sources from Table.Media suggest.
During his trip to Moscow, Orbán stated that Hungary ‘is gradually becoming the only country in Europe that can talk to everyone’. In Brussels, however, Hungary's role is viewed differently – as a lobbyist for China. Regardless of whether Orbán is acting in the interests of Trump, who aims to become a 'seller of peace' if he returns to the White House, or someone else, the Chinese problem in Hungary-EU relations appears much broader and deeper. And Orbán's unauthorised visit is just the tip of the iceberg.
Budapest and Beijing have been drawing closer in recent years. This rapprochement runs counter to the pan-European course aimed at minimising risks in relations with China. In a recently published report by the European Think-tank Network on China (ETNC), Hungary is identified as the only EU country actively resisting this course, and experts from the Observer Research Foundation (ORF) explicitly refer to Hungary as a 'Chinese Trojan horse' in Europe.
The essence of the new European policy towards China was formulated a year ago by European Commission President Ursula von der Leyen: 'De-risk – not de-couple'. The trigger for reassessing the relationship was China's reaction to Russia's invasion of Ukraine, but the decision had been maturing for a long time, von der Leyen noted. The ORF report cites key reasons such as human rights violations in Xinjiang, repression in Hong Kong, and the tense situation in the South China Sea. The growing political disagreements and the dramatic severance of trade ties with Russia have made EU leaders concerned about their own economic dependence on China. This dependence is so great that breaking economic ties even in a situation of acute conflict (e.g., an attack on Taiwan) is practically impossible (→ Re:Russia: Chinese Triangle).
While Russia was merely a crucial raw material supplier for the EU, China is one of its main trading partners overall. According to Eurostat, in 2023, China accounted for about 20% of European imports. By comparison, the US share was one and a half times less (13.7%). The EU's dependence on Chinese goods, necessary for the transition to renewable energy sources, is critical. For example, China accounts for about 90% of imports of solar panels, which are produced in minimal quantities within Europe itself (→ Re: Russia: From gas to electricity).
Some measures that can be described as 'de-risking' were taken by the EU even before the term appeared in official documents, the authors of a report by ETNC note. For example, in 2019, the EU adopted common rules for screening foreign direct investments – mainly to counter the mass acquisition of assets by Chinese companies. In 2020, restrictions were introduced on the purchase of Chinese telecommunications equipment, which, however, is still used to provide 5G services in 19 EU countries.
In 2023, four types of threats posed by economic dependence on China were formulated: disruption of supply chains, security of critical infrastructure, technology leakage, and market abuse. Over the past year, since the announcement of the new policy, several programmatic documents have been developed to regulate the application of export controls in general and in specific areas (e.g., microelectronics and new energy).
However, the development and implementation of specific measures are moving slowly. Only at the beginning of this month did the EU finally introduce long-discussed anti-dumping duties on Chinese electric vehicles. One of the main reasons is that not all EU members are equally strict, and one country – Hungary – is not participating in the process at all, note the ETNC experts. As long as Hungary holds the presidency of the EU Council, i.e., for the next six months, the already sluggish process of implementing the de-risking policy will be put on pause, predicts Politico.
Just as countries in the Global South benefit from ignoring Western sanctions against Russia, Hungary benefits economically by sabotaging Europe's de-risking strategy.
In 2023, Chinese companies invested around €3 billion in Hungary, which is 44% of all direct investments China made in Europe, according to experts from Rhodium Group and MERICS. Germany, France, and the United Kingdom collectively attracted less. The Hungarian National Investment Promotion Agency provides an even more impressive figure for 2023: $7.6 billion, though this includes both signed deals and agreements of intent (which may not materialise). The agency names South Korea as the second most significant foreign investor in Hungary (nearly $2 billion), and Germany as the third (just under $1 billion). Overall, China has already invested about $16 billion in Hungary. The lion's share of these investments is related to the production of electric vehicles. Factories in Hungary are being built by BYD, the world's largest manufacturer of electric cars, and companies specialising in the production of electric batteries and components for them (Eve Power, Huayou Cobalt, Sunwoda). Hungary is particularly attractive to these companies because factories of major European car manufacturers are already operating there, for which they can become suppliers. During Xi Jinping's visit to Hungary in May this year, no new large-scale projects were announced, although there were rumours that another Chinese auto giant, Great Wall, intended to build a plant in Hungary after BYD.
The idea of identifying and minimising risks in relations with China is not popular in Hungary, even among Orbán's political opponents, and he and members of his government openly criticise it, accusing the 'eurocrats' of following US directives at the expense of European economic interests. Moreover, Orbán insists that Hungary should attract more Chinese investments ‘to reduce dependence on Western capital markets’.
In other words, while the official EU strategy is to reduce dependence on China, the head of the EU presidency has declared a policy of 'reducing dependence on Western capital' by relying on Chinese capital.