Xi's Visit: How Is Chinese Investment Transforming Europe's Doorstep Through Hungary And Serbia?

During the recent visit of Chinese President Xi Jinping to Hungary, he was received in one of the few places within the European Union where his country is considered an indispensable ally rather than a rival. By the time he departed on Friday, deals had been secured that provided fertile ground for China's plans of economic expansion in Europe.

Following a meeting with nationalist Prime Minister Viktor Orbán on Thursday, a small group of select media in Hungary's capital, Budapest, was addressed by the leaders, announcing the formation of an "all-weather partnership" that would usher in a new era of economic cooperation.

Xi's Visit To Hungary And Serbia: Here's What We Know

As most EU countries make efforts to "de-risk" their economies from perceived threats posed by China, major Chinese investments have been courted by Hungary in the belief that the world's second-largest economy is essential for Europe's future.

While concrete agreements were not unveiled immediately after the meeting between Xi and Orbán, it was later stated in a video by Foreign Minister Péter Szijjártó that a deal had been reached on a joint Hungarian-Chinese railway bypass around Budapest, as well as a high-speed train link between the capital and its international airport, as reported by Hindustan Times citing AP.

According to Zsuzsanna Vegh, a program assistant at the German Marshall Fund and visiting fellow at the European Council on Foreign Relations, those deals were seen as "a clear signal that China sees Hungary as a key and reliable ally" in the EU as it seeks to reverse Europe's toughening de-risking policy.

In a statement, Vegh noted that Xi's visit shows that Hungary's government "remains indifferent to its allies' concerns and will continue to strengthen its bilateral ties with China in order to position itself favourably in what it perceives as a developing multipolar world."

A similar strategy is being pursued by Serbia, Hungary's neighbour to the south, which has also provided wide opportunities for Chinese companies to exploit its natural resources and carry out large infrastructure projects. During Xi's visit to Serbia, an agreement was signed with President Aleksandar Vučić to build a "shared future," making the Balkan country the first in Europe to agree on such a document with Beijing, as reported by AP.

According to Vuk Vuksanović, a senior researcher at the Belgrade Center for Security Policy, Xi's interest in Serbia reflects his strategy of appealing to countries that are less committed to a U.S.-led economic and political community. Xi's "shared future" agreement with Belgrade, Vuksanović said, promotes "China's vision of the international order, the one where China is much more powerful, the one where the Western powers, primarily the U.S., no longer have the ability to dictate the agenda to others."

The red-carpet treatment by Serbia and Hungary has concerned some of their Western partners, who see China's incursion into the region as both an economic and security risk. According to Gabriel Escobar, U.S. envoy for the Western Balkans, Xi chose to visit the neighbouring countries because they "are open to challenging the unity of the Euro-Atlantic community."

In February, a security agreement was concluded by Hungary with Beijing, whereby Chinese law enforcement officers would be permitted to assist their Hungarian counterparts in police actions within Hungary, as per AP reports. As Orbán has deepened relations with Beijing, he has also been engaged in a protracted conflict with the EU that has seen billions in structural funds frozen to Budapest over concerns that he has captured democratic institutions and abused the bloc's funds.

While the inflow of Chinese capital is a boon to Hungary's sputtering economy, having production sites on EU territory also helps Beijing to circumvent costly tariffs and Europe's increasingly protectionist policies, according to media reports. In December, it was announced that one of the world's largest EV manufacturers, China's BYD, will open its first European EV production factory in the south of the country, and large direct investments in the production of EV batteries have been invited.

Such investments, Orbán said Thursday, are what will keep Hungary competitive in the future, from wherever they come. "The concept driving the Hungarians is that we want to win the 21st century, and not lose it," he said.