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The autocratic leaders of Hungary and Serbia will roll out the red carpet for China’s Xi during his European tour

Budapest, Hungary — Chinese leader Xi Jinping will spend most of his five-day European trip this week in two small countries in the eastern half of the continent, a region that Beijing has used as a base for its growing economic ambitions in Europe.

After a stop in Paris on Monday to kick off his first European trip in five years, Xi will then travel to Hungary and Serbia, two nations with perceived autocratic leaders China-friendly and close to Russian President Vladimir Putin.

While mainstream European leaders are pursuing more protectionist policies to limit Beijing and Moscow’s influence on the continent, the governments of national conservative leaders Viktor Orbán of Hungary and Aleksandar Vučić of Serbia have vigorously courted economic ties with China and major investments in infrastructure , production, energy and technology.

As the first European Union country to join Xi’s signed Belt and Road Initiative, Hungary has walked a middle ground between its membership in the EU and NATO and an unusual openness to diplomatic and trade ties with eastern autocracies.

Tamás Matura, a China expert and associate professor at Corvinus University in Budapest, said Hungary’s location of key Chinese investments and manufacturing bases – and its agnosticism about doing business with countries with poor democracy and human rights records – had opened a crucial door to China within the EU trading bloc.

“The Hungarian government is China’s last true friend across the EU,” Matura said. “It is now very important for the Chinese to settle in a country that is within the borders of the EU… and is friendly to the Chinese political system.”

One of the biggest advantages for China in establishing bases within the EU: avoiding costly tariffs. The European Commission, the bloc’s executive arm, is considering raising tariffs on imports of Chinese electric vehicles (EVs) from the current 10% to protect the European auto market – a mainstay for Germany, the largest economy of the EU’s 27 member states .

But in December, Hungary announced that one of the world’s largest electric vehicle makers, China’s BYD, would open its first European electric vehicle production factory in the south of the country – a foray into the EU that upended the competitiveness of the continent’s automotive industry could pose.

This shift is already visible in Budapest, where a car dealer has begun reducing its offering of European vehicles and introducing models manufactured by BYD instead.

Márk Schiller, strategy and marketing director of the family-run Schiller Auto Group, said he believes European automakers are “already lagging behind” China in the transition to electric vehicle production. His company recently stopped selling cars from German automaker Opel and switched to BYD.

“That was a big change,” said Schiller.

Unconfirmed reports say Xi and Orbán will announce another investment in electric vehicle manufacturing involving China’s Great Wall Motor during his visit to Hungary from Wednesday to Friday. Orbán’s office did not respond to multiple requests for information about the timing of the visit.

In Serbia, in southern Hungary, China operates mines and factories across the Balkans, while billions more in infrastructure loans have financed roads, bridges and new facilities.

Hungary and Serbia have reached an agreement with Beijing to modernize the railway line between the country’s capitals Budapest and Belgrade. This is part of a Belt and Road plan to connect with the Chinese-controlled port of Piraeus in Greece as an entry point for Chinese goods into Central and Eastern Europe.

The bulk of the project, expected to be completed in 2026 after numerous delays, will be financed by loans from Chinese banks – the kind of capital that Hungary and Serbia were keen to use.

According to the AidData research lab at William & Mary, a public university in Virginia, Chinese lenders made more than $22 billion in loans to nine countries in Central and Eastern Europe between 2000 and 2021.

Of that, $9.4 billion went to Hungary and $5.7 billion to Serbia, dwarfing the totals of other regional countries.

Vučić said he was “honored” that Xi – whom he often refers to as a “friend” – is visiting on Tuesday. He said before the visit that Serbia would seek further Chinese investments, especially when it comes to advanced technologies.

But economic analyst Mijat Lakićević said he does not expect any major new investment deals because “everything Serbia does with China has already been agreed.”

Hungary has also created a favorable investment environment for China, providing generous tax breaks, subsidies and infrastructure aid to Chinese companies and helping them navigate Hungarian bureaucracy.

“They roll out the red carpets and get everything tailor-made by the government. And that’s a huge advantage,” said Matura, the China analyst.

Construction is underway near Debrecen, Hungary’s second-largest city, on a nearly 222-hectare, 7.3 billion-euro ($7.9 billion) electric vehicle battery factory, Hungary’s largest foreign direct investment ever.

Orbán’s government hopes the factory, run by Chinese battery giant CATL, will make the country a global hub for lithium-ion battery manufacturing at a time when governments are increasingly trying to limit greenhouse gas emissions by switching to electric cars.

Such investments come at a time when Hungary’s faltering economy is further hampered by record-breaking inflation and the freezing of billions in EU funds held back due to Orbán’s track record on democracy standards and the rule of law.

With EU funds at a standstill, China was ready to fill the gaps in Hungary’s budget, said Matura.

“The flow of EU funds into the Hungarian economy has almost completely stopped, so there is now an urgent need in Hungary to turn to other alternatives and other sources of financial capital,” he said.

Orbán has been open about why he prioritizes Chinese investment: He believes that Western economies are in decline and China is on the rise.

During a recent speech at the conservative CPAC conference in Hungary, Orbán outlined a vision of a “global economy organized on the principle of mutual benefit and free from ideology.”

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Jovana Gec reported from Belgrade, Serbia.

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