Hungary’s Turns Pressure On China’s BYD, CATL

VIENNA/GUANGZHOU — Hungary’s government is ratcheting up pressure on Chinese companies, reviewing previously approved opaque funding and investment deals while also tightening environmental regulations for factories, upsetting plans for companies like BYD and CATL.

The government of Prime Minister Peter Magyar, who assumed office in May, has made repairing relations with the European Union a top priority, marking a sharp shift from the pro-China policies pursued by former Prime Minister Viktor Orban.

The new government has pledged to strengthen environmental and labor standards and improve transparency in state subsidies. Magyar has said individual investment projects agreed to with China and other countries will be reexamined.

One company that has been named is Chinese electric vehicle giant BYD. The automaker has established its European headquarters in Hungary and plans to begin operations this year at an EV plant in the southern city of Szeged.

In late July, officials at Hungary’s Ministry of Foreign Affairs disclosed that the previous government had secretly promised BYD substantial subsidies and had agreed to accept roughly 10,000 Chinese workers.

Questions have also emerged over labor practices during construction of the plant, including allegations of excessive working hours and unpaid overtime. New York-based nongovernmental organization China Labor Watch reported that some Chinese workers interviewed said they had been required to work up to 14 hours a day, seven days a week.

It was also revealed in July that former Foreign Minister Peter Szijjarto, a close ally of Orban, had resigned from parliament and joined BYD in an executive role. As the person who negotiated the terms of BYD’s investment in Hungary, he could become the subject of a government investigation into a possible conflict of interest.

As the government begins to closely examine past deals, one area that could prove especially disruptive for Chinese companies is environmental regulations.

An executive from a local NGO investigating environmental pollution at battery maker CATL’s new plant. (Photo by Natsuki Kaneko)

Minister of Transport and Investment David Vitezy said in August that preferential treatment such as streamlined permit procedures for battery plants violating environmental rules would be suspended.

Authorities in June revoked the operating permit of Semcorp, China’s largest battery separator manufacturer, after groundwater samples taken at its factory in the eastern city of Debrecen revealed aluminum concentrations far above legal limits.

Environmental concerns have also surfaced at a battery plant operated by CATL, leading to growing local opposition. In August, the government fined the company for violations related to the storage of hazardous waste and other environmental regulations.

The government plans to establish a new agency as early as this month to monitor environmental compliance at battery factories. It is expected to have authority to conduct on-site inspections and order production suspensions. Environment Minister Laszlo Gajdos said factories that fail to comply with regulations will be shut down.

Magyar cultivated support among environmental groups in eastern Hungary, where many Chinese companies have invested heavily, criticizing what he described as Orban’s aggressive industrial policy. During the April parliamentary election that brought his government to power, he won decisively in cities including Debrecen, once an Orban stronghold. Environmental protection was a key campaign pledge.

Orban’s government actively courted Chinese investment as a driver of economic growth. During a meeting in Budapest with Chinese President Xi Jinping in 2024, the two sides agreed to expand EV sector investment. Critics say Hungary offered Chinese companies opaque subsidy arrangements and favorable regulatory treatment, particularly on environmental issues.

The EU imposed additional tariffs on Chinese-made EVs in 2024, arguing that they have been sold at unfairly low prices, threatening Europe’s auto industry. Chinese automakers that have positioned Hungary as a manufacturing base within the EU are now being forced to adapt.

While Magyar’s government is working to revise the country’s pro-China stance, few analysts expect it to provoke a major confrontation with Beijing.

“China will remain a key partner, but no longer as a privileged actor; its role will most probably be defined by clearer political and regulatory boundaries,” said Hungarian economist Bernadett Szel.

“[Magyar’s] Tisza Party’s emphasis on reconnecting to Western economic networks and value chains points toward diversification within the Indo-Pacific context,” she added. “This implies reducing one-sided dependence on China.”