Welcome to the 77th issue of the CEEasia Briefing.
In this issue, we dissect the following topics:
- Chinese FDI in Hungary faces greater scrutiny
- Czechia’s Senate Speaker travels to Taiwan while government in Prague mulls its China policy
- As Orban exits the stage, Fico and Vučić signal interest in strengthening their countries’ ties with China
If you like what you see, please forward this message to your friends and colleagues who can subscribe here.
Do you need to know more about the Indo-Pacific? Don’t hesitate to shoot us a message about custom analysis tailored to your needs.
1. Chinese FDI in Hungary faces greater scrutiny
What’s going on? Local and national authorities launched investigations into the BYD plant in Szeged and the CATL plant in Debrecen. This follows various reports from the media and civil society groups on labor and environmental issues at the two largest Chinese greenfield investment projects in Hungary and across Europe. National-level investigations were launched shortly after the inauguration of a new right-wing government led by Prime Minister Péter Magyar, who has pledged to review regulatory irregularities surrounding the Chinese projects and assess their environmental and social impacts on local communities. Both projects had their environmental impact assessments fast-tracked under the previous Orbán government without adequate public consultation.
Going deeper… The Hungarian police are investigating the BYD EV plant for improperly handling toxic soil from the construction site. The China Labor Watch NGO has also published a report alleging exploitative practices, including excessive working hours, delayed or withheld wages, and improper visa arrangements for Chinese workers. BYD has responded by urging its contractors to comply with Hungarian labor laws. Meanwhile, the CATL battery plant has faced protests over waste management, water use, and pollution concerns since construction began. The plant began producing battery cells in May, but amid ongoing water shortages and nationwide droughts, the water-intensive nature of battery manufacturing has come under even greater public scrutiny.
At the same time… There are significant limits to any potential crackdown on Chinese investment in Hungary. Given the country’s fiscal challenges, most notably its high debt-to-GDP ratio and budget deficit, Prime Minister Magyar will need to make fiscal adjustments on several fronts. This includes reducing the disbursement of state aid for foreign investment projects to fully access the previously frozen EU Recovery and Cohesion funds. That said, Hungary’s growth model will remain dependent on foreign investment. And given that Chinese facilities in Hungary are deeply integrated into German automotive supply chains, this will constrain the Hungarian government’s domestic and foreign economic policy choices.
This means… The new Magyar government will probably be more cautious in approving future Chinese investments and pursue stricter regulatory oversight of existing projects. Yet Chinese firms themselves have announced fewer new investments in Europe, especially greenfield projects, placing greater emphasis on exports, and there are currently few viable alternatives for Hungary. As a result, Magyar will likely still view Chinese investment as an important component of the country’s future growth and development strategy.
2. Czechia’s Senate Speaker travels to Taiwan while government in Prague mulls its China policy
What’s going on? The president of the Czech Senate, Miloš Vystrčil, visited Taiwan from June 1-4, alongside a delegation of representatives from Czech businesses and academia. Vystrčil returned to Taiwan six years after his landmark 2020 visit, when he famously declared, “I am Taiwanese,” in his address to Taiwan’s Legislative Yuan.
Going deeper… Vystrčil and his 40-member delegation were welcomed by Deputy Foreign Minister Francois Wu and met with President Lai Ching-te, Vice President Hsiao Bi-khim, and other senior government officials. During the meeting, President Lai presented Vystrčil with the “Special Grand Cordon of the Order of the Azure Clouds.” The visit led Charles University, Czechia’s highest-ranked institution, to sign a strategic partnership with Taiwan’s two foremost institutions, the National Taiwan University and the National Chengchi University. Taiwan’s government also pledged to establish a new €50 million venture capital fund managed by Taiwania Capital to encourage more Taiwanese investment in Czechia and vice versa.
Moreover… The visit has become a point of contention in domestic Czech politics. This is because the government denied Vystrcil (whose party is in the opposition) use of a government aircraft, forcing him to scale back the delegation and travel on a commercial flight. Czech Prime Minister Andrej Babiš used the opportunity to showcase the current administration’s new pragmatic turn in its foreign policy and distance itself from the value-based approach of the previous government, which supported Czech politicians’ visits to Taiwan. The Prime Minister said the policy of his predecessors “more or less brought nothing,” and only harmed Czech businesses in China.
However… The announcements of Taiwanese investments in the production of AI servers, the development of new technologies, and logistics and semiconductor supply chains show that the engagement has yielded concrete results. Parliamentary diplomacy, such as Vystrčil’s trip, will be crucial in keeping the relationship alive during the current government, which is unlikely to send or receive official visits to or from Taiwan or to support new cooperation projects politically. This was evident during the recent visits to Prague by Minister of Economic Affairs Kung Ming-hsin in December and Foreign Minister Lin Chia-lung in May, neither of whom met with representatives of the Babiš government.
Indeed… Czech Foreign Minister Petr Macinka signaled a shift towards a more pragmatic approach already at the beginning of this year. He has met with China’s Minister of Foreign Affairs, Wang Yi, twice, as Beijing seeks to seize the opportunity to express dissatisfaction with Czechia’s visits to Taiwan. The Chinese government, via its embassy in Prague, criticized these, urging the “Czech side to strictly abide by the one-China principle.” The Czech Foreign Minister insisted that trips by parliamentary representatives do not constitute official government policy. Still, it added that the visits “are the politicians’ own concern.”
3. As Orban exits the stage, Fico and Vučić signal interest in strengthening their countries’ ties with China
What’s going on? The Serbian president visited Beijing on a five-day trip to China from May 24 and met with President Xi Jinping, signing more than 20 cooperation agreements, covering areas such as politics, trade, technology and education. Concurrently, Li Hongzhong, First Vice-chair of the Chinese Parliament, visited Bratislava on May 19, meeting with Prime Minister Robert Fico and President Peter Pellegrini and discussing ways to further bilateral ties with Slovakia.
Going deeper… With the recent ousting of Hungary’s Fidesz from the government, China has seemingly been losing friendly governments in Central and Eastern European (CEE) countries. However, Slovakia and Serbia seem willing to step up. The latest visit from Li seems to affirm the mutually warm relationship between the two governments. In Slovakia, two major investments totaling €2.5 billion are currently underway, signed under the previous Slovak government, which was more critical of Beijing. Meanwhile, Serbia’s President Aleksandar Vučić has been facing increasing pressure from protestors in Belgrade and across the country for more than a year over a collapse of a canopy at a train station in November 2024 that killed 16 people. This accident also has a Chinese-investment angle, as for many Serbians it was rampant corruption and nepotism in state infrastructure projects with China that led to fatal disregard of safety rules.
This means… Even though Hungary’s pro-China government has left power, this does not mean a vacuum for further China-CEE relations. It seems that the more authoritarian-leaning politicians have signaled a shift toward a more open “all-azimuth” foreign policy, which may allow them to cater to Beijing. In a joint statement on May 25, amongst other things, Vučić and Xi said that “countries must not politicize human rights issues” and that the two nations would “practice multilateralism”. This suggests that Serbia seeks to navigate the current situation in CEE with arguably the doors open to all sides, even as it faces pushback at home. Notably, similar language appears in the 2024 agreed strategic partnership document between Slovakia and China, showcasing similar approaches to China policy amongst both countries.
Quick takes on CEEasia developments
CHINA | Czech prosecutors proposed to indict a man suspected of spying for China who was arrested in January. Chinese Foreign Minister Wang Yi also raised the case during a meeting with his Czech counterpart, Petr Macinka, in New York. Macinka reminded Wang that Czechia has an independent judiciary, which will assess and decide the case accordingly. The case’s development may complicate the Czech government’s efforts to “normalize” relations with Beijing.
TAIWAN | Taiwanese company i-TRANS Global, which specializes in the transportation of hazardous chemicals, plans to build a European logistics center for semiconductor chemicals in Czechia, in the Ústí Region near the German border. Until recently, Czechia appeared to be lagging behind Poland in securing a strong position in supply chains linked to the ESMC fab in Dresden. According to the Innovation Center of the Ústí Region, two other companies are in the pipeline, suggesting that Czechia is also set to benefit.
JAPAN | Nippon Steel will take direct ownership of US Steel Košice from October 2026 and rename the company Nippon Steel Slovakia, making the plant a key center of its European operations. The move reflects growing demand for high-quality steel in Central and Eastern Europe, as well as the impact of decarbonization, CBAM, tariffs, and geopolitical uncertainty on Europe’s steel market.
VIETNAM | Czech aircraft manufacturer Aero Vodochody is reportedly in talks with the Vietnamese Air Force over the delivery of another dozen L-39 Skyfox jet aircraft for pilot training, which would bring Vietnam’s fleet to 24 units. The deal follows the upgrading of the bilateral relationship to a strategic partnership in January 2025, when the two sides pledged to deepen cooperation in defense and security.
JAPAN | A new solar power plant with a large-scale battery storage system, invested by Japan’s Eurus Energy, has been completed in Baracska, Fejér County, adding both renewable generation and grid-balancing capacity to Hungary’s energy system. The project marks the first investment in the country and is a first step in expansion in Central Europe.
VIETNAM | European Commissioner Ekaterina Zaharieva, responsible for startups, research and innovation, visited Hanoi to strengthen EU-Vietnam cooperation on science, technology, and innovation. As the EU increasingly looks to Southeast Asia as part of its derisking strategy from China, the bloc seeks to promote investment opportunities in Vietnam linked to emerging technologies, including artificial intelligence, semiconductors, 5G, space technology, and cybersecurity.
