‘China’s Market is Huge: Whenever They Want Something, They Want a lot of It’

BBJ: You have a long experience with Hungarian-Chinese relations. What’s your take on how Chinese-Hungarian commercial ties have been developing?

Csaba Wolf: Actually, Hungarian-Chinese relations have always been good [although] after the Hungarian changes in 1989, trade went down. The first re-opening started around 2002. That government was aware of the importance of the relationship with China and started rebuilding them. Because of that, very soon, the Bank of China established a branch here in Hungary around 2003-4, direct flights between Budapest and China began and trade started to develop again.

BBJ: And investment began to take off?

CsW: Investment from China did not really start that fast at the beginning, and Hungarian investment did not go to China and is still not much. We have some Hungarian companies there, but not very many. Nowadays, we have a lot more Chinese companies investing this way. All governments since 2002 have emphasized the importance of building relationships with China, except that after 2010, there has been a special policy, the “Opening to the East” of the current government, that aims to build a strong economic relationship with China and all the region, even the Asian post-Soviet states, and Japan and Korea.

BBJ: What was the first significant investment?

CsW: The first was Wanhua, which acquired BorsodChem [the chemical plant in Kazincbarcika, 187 km northeast of Budapest by road]. That was worth EUR 1.5 million in total. I was a part of that deal as the Hungarian commercial counselor in Beijing at the time, so I’m kind of proud of it. It’s still probably the biggest single Chinese investment in the region.

BBJ: I get the impression that today Huawei [the Chinese IT-telco] is one of the most prominent investors?

CsW: Huawei is very important. They have an office here with a few hundred people and their European supply center, their logistics center, near Budapest. It has a contract manufacturing company, so yeah, they have a lot of operations in Hungary and employ a lot of local people too.

There are others: for example, Semcorp is building a factory near Debrecen for electric battery components [foil separators]. That’s quite a big investment [reported as EUR 183 mln], and it’s a greenfield. That’s important because the Chinese, in the beginning, did not really seek greenfield investments; they preferred operating factories, as with BorsodChem.

And the Bank of China is developing fast in the region; they’ve opened branches in Romania, Serbia, Austria and the Czech Republic but kept Budapest as the regional center.

BBJ: It’s kind of prestigious for Hungary?

CsW: Definitely. And this is one of the aims of the government, to make Hungary a financial center in the region for third-country investors. The China Construction Bank will also open a branch here soon, maybe in the first half of this year. It’s one of China’s four biggest banks. And the China Development Bank or the ICBC, China’s biggest bank, has intentions to open here too.

BBJ: So we’ll have at least three very large Chinese banks here?

CsW: You can say for sure after they’ve opened, but they have this plan.

If you think about it economically, trade and investment, jobs in Hungary, markets for Hungarian products, and probably well-priced, Chinese products, even high-quality products, in Hungary, this is all good. The Chinese economy is developing very quickly, at about 6% per year.

BBJ: And the base is massive.

CsW: Yeah, the base is really massive. Living standards have grown in China, salaries are higher, the middle-class is becoming big, and technological solutions in China are in some cases way ahead of other countries in the world. Take 5G technology or a lot of software services, IT solutions, payment solutions.

China even has a digital currency development, not the traditional bitcoin kind, but a digital Chinese yuan. They have already started experimenting with it to digitalize their currency.

BBJ: In other words, it’s worth just being plugged into the Chinese economy?

CsW: Yes. They are way ahead of us in certain areas, and we can learn from them. Even their automotive industry; they manufacture the most number of cars per year [of any country]. Probably by value, it’s not as much as the USA, Japan or Germany, but the number of cars. Quality? Yeah, they are behind quite a lot of countries, but they are developing very quickly. For affordable electric vehicles, probably Korea’s are the best now, but I’m not sure that will be the same in five years.

BBJ: What about Hungarian exports to China?

CsW: A big part of the exports to China are like, for example, Audi, which manufactures engines in Győr, and these are shipped to China to fit into cars made there.

But for purely Hungarian companies, it has always been difficult to sell to China. The whole world is competing for that market. Hungarian companies don’t manufacture in big volumes, and the Chinese market is huge, so whenever they want to buy something, they want a lot of it. And this is difficult to satisfy.

If we think about products like, say, red wine, which is world-class in Hungary, but production is small by international standards. So, if a Hungarian winery can make a deal with just one city district, or one hotel chain in China, that’s already a huge business.

Still, Hungary has technical products that can have a place in the Chinese market, for example, medical equipment. We have some new companies manufacturing diagnostic equipment, microscopes and other medical equipment. If you have a technology developed like no one else in the world, then you can get in.

Chinese Business Etiquette can be Tricky

Having lived and worked in China for 10 years, few Hungarians know more about Chinese habits and business culture and how they differ from European norms than Csaba Wolf. Here, he outlines some of his insights into this sometimes crucial aspect of doing business.

“It starts with very simple things, like handing over business cards. For the Chinese, it’s always with two hands, and the card must be arranged so the name is immediately visible to the recipient, who in turn must take it with both hands,” he says.

Next up, gifts for business partners have to be carefully chosen. “You need to know what would be hurtful if you gave it to a Chinese person, which in Europe might be considered normal.”

For example, one should never give a knife, or anything with a sharp blade, as a present, since to the Chinese, this could represent severing the relationship. However, with increasing exposure to Western business manners, the Chinese themselves are changing and adapting to our business cultures.

“I think earlier, in the 1990s, it was a bigger problem. They are learning too,” Wolf explains. Nonetheless, he says he can always spot a Chinese newcomer to Europe.

“Seeing a person who’s just arrived and one who’s lived here for five years, for me, it’s obvious: there’s a huge difference between them.”

This article was first published in the Budapest Business Journal print issue of March 11, 2022.