Chinese and Indian FDI in Hungary and the role of Eastern Opening policy

Katalin Völgyi,Eszter Lukács

doi:10.1007/s10308-020-00592-1

Abstract

The aim of this paper is to assess the main features of Chinese and Indian investments in Hungary and the role of the Hungarian Government’s Eastern Opening policy in the attraction of investments from these two Asian giants. This paper covers the sectoral distribution, modes of market entry, and motivations of Chinese and Indian foreign direct investments. The automotive sector is the most attractive sector for investors from both countries. ICT manufacturing (electronics) and services, and the renewable energy sector are also very attractive for Chinese companies. The same is true for IT/BPO services and the chemical sector in the case of Indian companies. Chinese and Indian companies enter the Hungarian economy mainly through green-field investments or acquisitions. Market-seeking and strategic asset-seeking motives are dominant in the case of investors from both countries. This paper also puts a special emphasis on studying the impacts of Hungary’s Eastern Opening policy (launched in 2012) on Chinese and Indian investments. The findings show that the Eastern Opening policy has had a significant impact on the investment decision (location choice) of new Chinese and Indian investors and further expansion of investments by Chinese and Indian companies located in Hungary due to four factors, namely high-ranking political meetings, strategic cooperation agreements, cash grants from the Hungarian Government and supportive services of HIPA.

Highlights

Developing Asia in the global economy provides several topics for academic research
The greater proportion of global FDIs have still originated from developed country transnational corporations (TNCs) in recent decades, TNCs of some developing and transition economies have been playing an increasingly important role in outward FDI (UNCTAD 2006, p. 245)
To complement the aforementioned literature, we provide in this study a more detailed and up-to-date analysis of the characteristics of Chinese and Indian investments in Hungary

Summary

Introduction

Developing Asia in the global economy provides several topics for academic research. In the past, developing countries mainly functioned as host economies for foreign direct investments of these TNCs. the greater proportion of global FDIs have still originated from developed country TNCs in recent decades, TNCs of some developing and transition economies have been playing an increasingly important role in outward FDI We deal only with outward foreign direct investments of Asian members of BRICS, namely China and India with a host country focus on Hungary. This investigation is motivated by one of the main goals of Hungary’s Eastern Opening policy, namely the attraction of more FDI from the East (Asia). Some conclusions are made at the end of the paper

Literature review

Findings

Conclusions