The FDI angle:

• Xi Jinping's first trip to Europe since 2019 reflects a shift in China's strategy.
• Hungary and Serbia were the two largest recipients of Chinese foreign direct investment (FDI) in Europe during the past three years.
• Why does this matter? Mr Xi is building economic and diplomatic ties with countries like Serbia and Hungary to access European markets as larger European countries become more cautious about their China relations.

The choice of stops on Chinese president Xi Jinping’s tour last week of Europe, his first since 2019, were no accident. He arrived in France on May 5 to meet president Emmanuel Macron, who has stressed Europe’s need for “strategic autonomy” and to avoid becoming a “vassal” in the US-China conflict. 

Then Mr Xi moved on to Serbia, a non-EU and non-Nato member, where  government claims that Kosovo is part of its territory are ideologically similar to  China’s claims over Taiwan.  His trip then concluded on May 10 in Hungary, where he proclaimed China-Hungary relations to be at their “best in history”.

Aside from geopolitical reasoning for each visit, these three countries have another thing in common: high levels of recent Chinese FDI. 

Between 2021 and 2023, China-based companies made $12.1bn of investment pledges in Hungary, according to fDi Markets, more than in any other European country and an increase from $1.05bn during the previous three years. Over the last three full years, Serbia was the European country with the second highest Chinese FDI at $6.84bn, more than double the figure between 2018 and 2020. France, meanwhile, attracted $2.3bn of Chinese FDI in 2023 alone, the highest level since 2016.

Mr Xi’s Europe trip was a closely choreographed affair at a time of intense scrutiny on Beijing. The EU worries about its over reliance on China and the need to address imbalance in its trading relationship. The US has intensified its tech war with China and Russia’s full-scale invasion of Ukraine has led to scrutiny over Beijing’s perceived neutral stance on the war.

Abishur Prakash, founder of The Geopolitical Business Inc, an advisory firm, tells fDi that Mr Xi’s trip is an “indicator of how different the world is today” and reveals a shift in China’s strategy in Europe towards smaller economies which are “willing to stand shoulder to shoulder” with Beijing. 

“China has learned a big lesson from the likes of [telecom groups] Huawei and ZTE, where building in China and exporting to the world is no longer a concrete plan because geopolitics is coming into play,” says Mr Prakash. “The best strategy for China now is building in regions and selling into those same regions. The goal with Serbia and Hungary is to link these countries in a new geo-economic chain and use them to ensure China can keep certain doors open.”

In Magyar Nemzet, a Hungarian publication controlled by prime minister Viktor Orban’s ruling Fidesz party, Mr Xi wrote that Hungary was “the number one target in the central eastern European region for Chinese investment”. 

This is reflective of China’s stranglehold on critical supply chains, including electric vehicles (EVs) and the batteries, components and critical minerals that underpin them. This includes Ningde-based battery maker CATL, which is behind Hungary’s largest ever single FDI project. Chinese EV maker BYD and battery component giant Huayou Cobalt are also both opening their first European factories in the country.

In fact, Hungary has attracted four of Europe’s 10 largest Chinese FDI projects since 2023 (where the investment amount is confirmed in news or company press releases), according to fDi Markets.

Meanwhile, Serbia has been the target for China’s two largest FDI projects in Europe since 2023. Zijin Mining plans to invest $3.8bn into its copper-gold mine close to the city of Bor. Nearby, the company announced its intention to build a €2bn hybrid wind and solar plant to produce green hydrogen with Shanghai Fengling Renewables. 

In northern France, Chinese companies are also involved in projects across its battery valley, where Xiamen Tungsten New Energy Materials is jointly investing €1.5bn with local industrial group Orano into two EV battery component plants. 

Max Zenglein, chief economist at the Mercator Institute for China Studies, a Berlin-based think tank, says that Mr Xi’s choice of stops on his trip reflects China’s intentions to “keep Europe as open as possible” as there are concerns in Beijing that the EU will “take a more aggressive stance” similar to the US.

“They are trying to emphasise the positive trajectory of the relationship that is focused primarily on business ties,” says Mr Zenglein, who adds that Mr Xi’s visit to Hungary was a way of showing how greenfield investments, and the jobs they create, reveal the benefits of China’s relationship with the EU.  

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