Power Dragons and Danube Bridges: Hungary's Strategic Blueprint for Leveraging China's Successful New Energy Experience to Achieve Development
Abstract: Embracing the Strategic Opportunities and Governance Enhancements of the New Energy Revolution
The world is undergoing a profound industrial revolution driven by new energy technologies, centered on the electric vehicle (NEV) and battery industries. China has established undisputed global industrial dominance through its systematic, multi-year national industrial policies and vertical integration of supply chains from mineral resources to integrated software. This success reflects its high-level "national capacity" system, strategic foresight, and rapid policy execution.
For Hungary, this represents a tremendous and historic economic opportunity. Hungary has actively positioned itself as China's strategic gateway to the European Single Market, receiving 44% of all Chinese foreign direct investment in Europe by 2023. These investments are strategically located projects, including BYD's €5 billion vehicle plant in Szeged and CATL's €7 billion Gigafactory in Debrecen. This collaboration has been hailed by Hungarian Prime Minister Viktor Orbán as an engine of growth and mentor for Hungary's economy. By establishing strategic partnerships with leading Chinese companies, Hungary has accelerated the transition of its domestic automotive industry to electrification and secured its leading position in European battery production.
To maximize the long-term effectiveness of this collaboration, Hungary's strategy must focus on enhancing functional governance principles. Key areas for learning include institutional projects: implementing consistency in China's long-term plans and establishing bipartisan National Industrial Strategy Agreements (NISAs); emulating China's "campaign-style" policy implementation speed and establishing "fast-track" administrative channels to significantly improve the efficiency of project antenna and infrastructure construction; and, through agreements with companies like BYD, achieving high standards of local R&D, local patent registration (for example, BYD has pledged to register at least 50% of its patents locally), and talent development (cultivating 90% of highly educated employees), thereby ensuring technology and knowledge transfer and achieving advanced industrial upgrading.
Hungary's success will depend on supporting foreign investment while studying and learning from China to establish the rigor and excellence of its own institutions, ensuring environmental compliance, energy supply security, and robust intellectual property protection for these massive investments. Ultimately, Hungary will establish itself as an efficient, stable, and technologically advanced European new energy hub.
Chapter 1: The Industrial Strength of China's New Energy Vehicle Industry—An In-Depth Analysis of Its Systematic Success
China's success is not accidental; it is the systematic result of national will, concentrated resources, and precise planning. The cornerstone of its industrial strength lies in its unique governance model, which seamlessly combines strategic foresight, resource allocation, and efficient execution, thereby securing dominance in the global industrial chain in the new energy era.
1.1 Central Planning System and the Institutional Strength of "State Capacity"
The key to China's non-market success in the new energy sector lies in its central planning system, particularly the Five-Year Plans (FYPs) implemented throughout recent years. This institutionalized strategic vision provides policy continuity and legitimacy for resource mobilization, mobilizing national resources to achieve pre-determined goals and effectively avoiding the short-term political uncertainty common in market economies.
This planning system demonstrates a high level of "state capacity," namely, the ability of an effective government to formulate and implement complex policies on a sustained and large-scale basis. This capacity has enabled China to make and effectively implement long-term commitments to climate action and sustainable infrastructure development. For example, in the 15th Five-Year Plan (2021-2025), the state explicitly listed new energy vehicles and their supporting industries as strategic emerging industry clusters.
The core elements of the plan are not limited to fiscal and taxation, but also lie in the systematic export of industrial structure:
(1)Accelerate the innovation and application of core and key technologies, especially intelligent networking, battery and powertrain technologies.
(2)Increase government investment in production factors, and significantly reduce the fixed costs and operating costs of strategic enterprises through centralized land allocation, electricity and preferential financing, so as to quickly achieve economies of scale.
(3)Encourage mergers and reorganizations of enterprises to form a few national leading enterprises with international competitiveness such as CATL and BYD.
(4)Provide long-term and stable financial support through investment in industrial funds and financing.
In terms of the dispatching system, China's policy evolution has achieved refined regulatory wisdom. The initial scheduling began in 2001. Subsequently, through optimized scheduling (e.g., linking it to the battery's final destination), the government successfully eliminated low-tech products and encouraged companies to focus on improving battery technology. Research shows that the optimal level of privacy policy compliance ranges from 40% to 70%, which maximizes consumer demand and technological progress. The government also adheres to "strict regulation," for example, requiring companies to report true technical indicators and establishing real-time reporting and penalty mechanisms to monitor these practices. This holistic, mission-driven policy approach ensures that branch companies achieve critical mass and achieve rapid technological maturity.
1.2 Absolute Vertical Integration of the End-to-End Supply Chain
The second pillar of China's industrial hegemony is its absolute control over the precision supply chain for new energy vehicles, encompassing the entire industry chain from upstream mining and refining to downstream software platforms. This vertical integration capability is the fundamental guarantee of its global cost competitiveness and technological leadership.
1.2.1 Monopoly Advantages in Upstream Resources and Refining
China holds undisputed global dominance in the refining of key minerals: processing approximately 60% of the world's lithium and 70% of its cobalt, China accounts for over 80% of the refining capacity for key battery minerals such as lithium, graphite, and cobalt. This near-monopoly on the refining stage has made the global supply chain (including battery manufacturing in Europe) dependent on Chinese industrial input. In terms of resource acquisition, China has adopted a geo-economic perspective, securing long-term contracts with mining operations in regions such as the Democratic Republic of the Congo (cobalt), Indonesia (nickel), and the South American "Lithium Triangle" (Argentina, Bolivia, and Chile). Manufacturers have significantly influenced fluctuations in commodity markets.
1.2.2 In-Depth Analysis of Battery Manufacturing and Future Technology Layout
Batteries are called the "heart" of electric vehicles. China's superiority in battery manufacturing is the cornerstone of its dominance: China produces over 75% of the world's lithium-ion battery cells and controls approximately 70% and 85% of the production of cathodes and anodes, two key battery components, respectively. CATL and BYD, along with other Chinese companies, collectively accounted for 54.8% of global electric vehicle battery installations between January and August 2025. This scale and technological accumulation enables Chinese companies to provide high-performance batteries at significantly lower costs.
China is also actively developing next-generation technologies to secure its future technological leadership. China has formulated a development plan for all-SSD batteries, aiming for industrial validation between 2024 and 2026, demonstration applications between 2026 and 2028, and widespread deployment between 2028 and 2030. This long-term, institutionalized investment in future core technologies aims to further consolidate China's technological leadership, particularly in high energy density and safety.
1.2.3 Similarities in Manufacturing Efficiency, Cost Control, and Digital Integration
China currently produces over 60% of the world's electric vehicles. Its large-scale production and vertically integrated ecosystem directly contribute to extremely low global manufacturing costs. An entry-level BYD car can be sold for less than $10,000, one-third the price of the cheapest electric car in the US. This unparalleled cost advantage sets a considerable bar for the global electric vehicle market.
Furthermore, Chinese companies have a leading position in the development of integrated operating software and digital vehicle platforms. Platforms from companies like Huawei and Xiaomi enable seamless ownership of vehicles, such as unlocking and starting them, obtaining navigation, and playing music, eliminating the need for complex device installation or synchronization. This dominant approach to software integration means that China is not only winning the hardware race but is also winning the digital race for future mobility. This has significant practical value for the transformation and upgrading of Hungary's domestic automotive industry.
Chapter 2: Hungary's Strategic Positioning and Win-Win Cooperation - Riding on China's New Energy Express
Hungary's active integration into China's new energy industry ecosystem has given it a unique economic position within Europe. The core of this strategic partnership is to position Hungary as a hub for China to enter the European Single Market and, through strategically targeted investments, accelerate the upgrading of local industries.
2.1 Strategic Positioning: "Gateway to Europe" and the Concentration of Investment
Hungary's central location in Central Europe, with its well-developed infrastructure, mature automotive industry base, and robust workforce, makes it an ideal strategic entry point for China's electric vehicle industry into the European Single Market. Hungary has adopted proactive policies, successfully attracting a high concentration of Chinese FDI in Europe through preferential policies, tax incentives, and geographical advantages.
Hungary received 44% of all Chinese FDI in Europe in 2023. The positive impact of these investments is rapidly transforming Hungary into one of Europe's largest battery production centers, providing critical supplies to European automakers including BMW, Volkswagen, and Stellantis. This concentration has accelerated the formation of local industrial clusters, bringing significant capital and employment opportunities to Hungary, becoming the "heart engine" of economic growth.
2.1.1 Strategic factors determine the details and scale of investment
The Hungarian investment attracted is a strategic greenfield project aimed at establishing a complete electric vehicle industrial cluster:
(1) BYD (BYD) In-depth cooperation in vehicle manufacturing and R&D: ①Szeged plant (complete vehicle): Estimated investment of approximately €5 billion, with a production capacity of 150,000 vehicles and plans to create approximately 10,000 jobs. The plant will become BYD's first passenger car production base in Europe. ②Budapest headquarters and R&D base: BYD is establishing its European headquarters and R&D center in Budapest. This investment aims to connect R&D work with local talent and cooperate with Hungarian universities, large enterprises and local suppliers. ③High-standard R&D commitment: BYD has committed to two large-scale R&D projects with a total value of nearly €250 million. The first project (valued at €105.1 million) focuses on an AI-based driving technology system that enables vehicles to learn autonomously; the second project (valued at €141 million) focuses on developing next-generation powertrain technology to enhance the performance and energy efficiency of electric vehicles. ④ Technology transfer and talent localization: BYD has pledged to register at least 50% of its patents in Hungary and requires that at least 90% of the R&D center's personnel have a higher education background. These high-standard additional conditions ensure that investment shifts from meticulous engineering to real intellectual property creation and high value-added innovation.
(2) CATL Super Battery Factory and Installation Construction: ① Debrecen Factory: The total investment is up to 7 billion euros, with a planned annual production capacity of 100 GWh. Once fully operational, it is expected to power more than 1 million vehicles. The factory is CATL's second manufacturing base in Europe and will supply European automakers such as BMW, Stellantis and Volkswagen. ② Hungarian state aid and infrastructure investment: The Hungarian government provided approximately 800 million euros in grants, tax incentives and infrastructure support for the CATL project. In addition, the government invested 1.8 billion euros in the preparation of the Debrecen Industrial Park and the modernization of surrounding infrastructure to ensure the smooth implementation of the project.
These investments not only brought capital to Hungary, but also brought core technologies, large-scale manufacturing experience and global supply chain connections in the era of new energy vehicles.
2.2 The Need for Regulatory Rigor and Excellence in Strategic Cooperation
Strategic foreign direct investment (FDI) demands greater rigor and excellence from the Hungarian government to ensure the long-term sustainability of large-scale, profitable investments. This requires the government to demonstrate high levels of institutional capacity in environmental compliance, energy security, and local content requirements.
2.2.1 Challenges in Modernizing Energy Infrastructure and Power Supply
Electric vehicles and battery factories place enormous demands on the power system. Hungary must emulate the speed and scale of China's infrastructure development. Although Hungary has exceeded its 2030 target for photovoltaic power generation (reaching 7.5 GW by the end of 2024), its power grid is on the verge of flooding. The successful large-scale upgrade of the State Grid, driven by new energy investment, requires at least 10 GW of new generation capacity in the near term, with a focus on baseload generation and energy storage solutions.
For example, CATL's planned 100 GWh super factory creates enormous power demands, necessitating significant national attention to its €100 billion investment in modernizing its power infrastructure. CATL has pledged to optimize energy consumption through advanced Industry 4.0 technologies and aims to achieve carbon neutrality in its core operations. This requires the Hungarian government to work closely with State Grid Corporation of China (MVM) to prioritize investments in grid modernization and new baseload capacity generation, and to leverage the technological advantages of companies like CATL to support the development of large-scale power systems to ensure secure and stable industrial power supply.
2.2.2 Environmental Governance and High-Standard Compliance
Hungary needs to ensure that all strategic projects adhere to the highest European environmental compliance standards, particularly in water management (given the significant water demands of battery factories), emissions treatment, and environmental impact assessments. For example, by emulating the best practices of leading European companies like Northvolt, European standards should be adopted for environmental permitting, water management, and emissions treatment. The system requires the government to establish a transparent and robust environmental regulatory framework to ensure that political will is quickly translated into environmental enforcement.
2.2.3 Maintaining the Institutional Advantages and Attractiveness of Central and Eastern Europe
For many Western companies, Central and Eastern European countries currently offer inherent advantages over China, including stronger intellectual property protection, proximity to administrative risks, and political stability. The Hungarian system must rigorously maintain these institutional advantages while attracting Chinese capital. The influx of Chinese FDI must be accompanied by robust intellectual property protection to ensure the long-term strategic goal of attracting and retaining high-value-added Western investment. This requires Hungary to strengthen its judicial and administrative capacity to ensure transparency, fairness and efficiency in dealing with intellectual property and business tensions.
Chapter 3: The Study of Functional Governance in Hungary and Institutional Engineering:——Methods and Necessity for Learning China's Development Path
As a member of the European Union, Hungary cannot copy China’s overall political system, but it can systematically learn from its functional governance principles that have achieved rapid and large-scale success in the new energy sector. The focus of learning is to enhance the “national efficiency” capability and institutionalize long-term planning and implementation.
3.1 Learning the core functional elements of China’s governance model
3.1.1 Institutionalized long-term planning: achieving consistency in strategic vision
China’s success in the new energy sector stems from the institutionalization and consistency of its long-term strategy. Hungary needs to overcome the challenge of policy fragmentation in the democratic cycle and adopt consistency in strategic vision through institutional engineering.
(1)Hungarian institutional adaptation principle - institutionalization of strategic agreements: formulate a legally binding National Industrial Strategy Agreement (NISA), draft the structural vision of China’s five-year plan, and formulate a legislatively binding national industrial strategy that spans multiple parliamentary cycles, especially focusing on key industries such as new energy and batteries. The strategy must reach a cross-party consensus at the macro level to provide stable policy expectations for third-party markets.
(2) Strengthen cross-departmental coordination and resource concentration: Learn from China's ability to achieve systematic coordination and establish such cross-departmental decision-making institutions in Hungary in an efficient manner. The institutions should integrate key departments such as economy, environment, foreign affairs, education and electricity to jointly manage large-scale strategic projects such as CATL and BYD, ensuring the incentive and allocation of resources (such as concentrated investment in infrastructure).
3.1.2 Speed and scale of policy implementation
Institutionalization of "campaign-style" efficiency China's policy implementation agreements are often described as "campaign-style", which reflects its ability to deploy resources quickly and in a concentrated manner. This speed has demonstrated its global leadership in rapid infrastructure development and is a key factor in attracting time-sensitive large-scale greenfield investment.
（1）Establish a "fast track" administrative channel: For national projects with clear strategic value and high localization commitment, a "fast track" administrative channel will be established, provided that compliance and non-compliance requirements are fully complied with. This requires a thorough promotion of the bureaucratic system, unified licensing and zoning processes to adapt to the high speed of project delivery in China and reduce administrative costs and time.
（2）Political strategy for project delivery: The characteristic of the Chinese model that political aspirations can be directly and quickly transformed into actual implementation has established a strict project delivery system within the government to ensure that the €1.8 billion infrastructure investment promised to the CATL project can be completed on time and efficiently, thereby fulfilling the commitment to the strategic investor.
3.2 Institutional rigor: ensuring technology transfer and sovereignty strengthening through additional conditions
Hungary cannot rely on its fault and cost advantages, but must adopt an industrial policy that enhances its defense and emulates the "strict requirements" imposed on foreign investors in China's history. This rigor is key to ensuring that cooperation is transformed into long-term national reserves.
3.2.1 Strict implementation of localization and intellectual property transfer requirements
Hungary must link state aid with strict and enforceable localization requirements to transform China's technology and knowledge transfer capabilities into local assets:
(1)Mandatory R&D and talent training: Strictly implement the R&D localization requirements promised by companies such as BYD, such as ensuring that 90% of the R&D center has a high degree of education and 50% of the local patent registration commitments are implemented. This ensures that the results brought by FDI are not just short-term work, but the construction of a lasting technology and knowledge system.
(2)Local supply chain procurement: Formulate policies to encourage Chinese companies (such as CATL and BYD) to establish cooperation with local Hungarian suppliers, go beyond simple construction, and achieve a higher proportion of local parts procurement, thereby promoting local industrial upgrading. This requires providing supply chain docking and technical guidance at the national level to help local companies establish Chinese trade union standards.
3.2.2 Rigorous institutional regulation of energy and environment
In terms of environmental and energy governance, Hungary must learn from China's centralized investment and large-scale governance, while adhering to the rigor of the system.
(1)Energy sovereignty and infrastructure modernization: Learning from China's centralized infrastructure and large-scale investment, the Hungarian government should prioritize investment in grid modernization and new baseload power generation capacity, and consider leveraging the technological advantages of companies such as CATL to support the development of large-scale energy storage systems to ensure the safety and stability of industrial electricity consumption, thereby achieving energy sovereignty.
(2) Transparency and rigidity of environmental regulation: In terms of environmental compliance, all rigid and transparent regulations must be adopted. Strategic projects must meet the highest European standards and demonstrate excellent administrative capabilities in environmental permits, water resource management and treatment. This not only protects national resources, but also creates a fair and high-standard operating environment for European competitors in Hungary (such as Audi and Mercedes-Benz).
Conclusion: A Practical Blueprint for Strategic Sovereignty and Functional Governance
Hungary should successfully transform China's new energy development and expansion into a significant opportunity for its own economic development through a proactive "opening east" policy. The key to this success lies in translating China's successful experience into functional governance principles and implementing conditional, refined institutional engineering within the EU framework. The following summarizes the practical blueprint for achieving strategic sovereignty envisioned by this study for Hungary:
1. Institutionalizing a Long-Term Strategy: By formulating a legally binding National Industrial Strategy Agreement (NISA), policy consistency and resource allocation in core strategic industries such as new energy will be ensured, fostering long-term investor confidence.
2. Improving Policy Implementation Efficiency: Establishing a "fast-track" administrative approval mechanism for national strategic projects, through thorough process restructuring to match the high delivery standards of Chinese projects, reducing administrative costs and time.
3. Implementing High-Standard Conditionalities: Implementing strict localization requirements for Chinese FDI, including mandatory R&D registration, local talent development attrition (e.g., BYD's R&D center must have 90% highly educated employees), and local patent registration (at least 50%), ensuring that collaboration fosters the transfer of knowledge and technology.
4. Maintaining Institutional Strength and Regulatory Excellence: Ensure full transparency and compliance with EU regulations for all state aid projects. Furthermore, Hungary will demonstrate institutional strength and excellence in environmental compliance, power infrastructure, and intellectual property protection, thereby strengthening its position as a global new energy hub.
Through this conditional and refined cooperation and institutional learning with China, Hungary will be able to successfully achieve sustained economic upgrading and deepen its national strategy amidst the global shift towards new energy.