Building bridges in times of ‘de-risking’

Supply chain cooperation serves as a model of open resilience in the era of Globalization 2.0

The fourth China International Supply Chain Expo, held in Beijing from June 22 to 26, came at a time when global supply chains are undergoing profound transformation. The challenge facing governments and businesses today is how to enhance economic security while maintaining competitiveness in an interconnected world. While China promotes international cooperation through platforms such as the CISCE, the European Union increasingly emphasizes “de-risking” and supply-chain nationalism.

Much of the recent debate has focused on geopolitics and the rise of new economic powers. Yet a deeper economic transformation is taking place. The first phase of globalization was primarily about the internationalization of products and trade. Today, a new phase — Globalization 2.0 — is emerging, characterized by the globalization of production networks, logistics systems, technologies and supply chains. Global supply chains are not disappearing; they are being reorganized and diversified.

This debate is particularly relevant for China-EU relations. China remains the EU’s second-largest trading partner in goods, while the EU continues to be one of China’s most important export markets. Despite growing discussions about “de-risking”, economic interdependence remains substantial. Hungary offers a useful example of how a European country can adapt to these changing realities and integrate itself into emerging Eurasian supply chains.

China-Hungary economic relations have undergone significant transformation over the past two decades. During the early 2000s, cooperation was driven primarily by trade. Bilateral trade expanded to $20.8 billion in 2025.

Since the second half of the 2010s, investment has been the defining feature of bilateral economic cooperation. In 2025, China maintained its position as the largest source of foreign investment in the country. Hungary has become one of Europe’s most important destinations for Chinese investment.

And the broader trend of supply chain cooperation embedded in bilateral trade and investment is also very significant. The following are four pillars that support supply chain cooperation between Hungary and China.

First, logistics. Connectivity has become a strategic asset in modern supply chains. Budapest has emerged as one of Central Europe’s most important gateways for Chinese passenger and cargo traffic, with direct flights connecting Hungary to seven major Chinese cities.

Hungary is also part of the China-Europe Railway Express network, while the modernization of the Budapest-Belgrade railway is expected to strengthen trade links between Asia and Europe. These developments have enhanced Hungary’s role as a logistics hub connecting Eastern and Western markets.

Second, manufacturing. Hungary’s strong industrial base, particularly in the automotive sector, has provided a solid foundation for deeper integration into global value chains. It is estimated that the automotive industry accounts for more than 16 percent of Hungary’s exports and remains one of the country’s most important manufacturing sectors.

This industrial ecosystem has made Hungary an attractive location for Chinese manufacturers seeking access to European markets. As a result, the relationship has evolved from a traditional trade partnership into a deeper integration of production networks.

Third, green transition. The most dynamic area of China-Hungary cooperation is the green economy. The global shift toward electric mobility and renewable energy is reshaping industrial value chains, and Hungary has positioned itself at the center of this transformation.

Leading Chinese companies, including CATL, BYD, EVE Energy, Huawei and Wanhua, have established major operations in Hungary. Their investments span battery manufacturing, electric vehicles, energy storage technologies, advanced materials and renewable energy solutions.

These projects do not represent isolated investments. Together, they form an integrated industrial ecosystem that connects Chinese technological capabilities with European manufacturing and consumer markets.

Hungary’s role in battery production has expanded particularly rapidly. By 2020, Hungary had become the world’s sixth-largest exporter of batteries, a remarkable achievement for a country of fewer than 10 million people. Current projections suggest that Hungary’s battery manufacturing capacity could eventually reach about 250 gigawatt-hours annually, potentially supplying more than one-third of Europe’s battery demand.

Chinese participation in Hungary’s green transition extends beyond batteries and EVs. Chinese companies are also involved in renewable energy projects, including one of Hungary’s largest planned solar developments.

Naturally, environmental concerns related to battery production and large-scale industrial projects can be addressed through strict regulation, transparent standards and continuous monitoring. Sustainable development remains essential for the long-term success of these investments.

Fourth, innovation. The most important long-term trend is the gradual movement up the value chain. China-Hungary cooperation is increasingly expanding from trade and manufacturing to new frontiers such as research, development and innovation.

Several Chinese companies have established regional R&D centers in Hungary. Huawei and BYD are among the companies expanding innovation-related cooperation, while partnerships between Chinese companies and Hungarian universities continue to grow.

This evolution demonstrates how participation in global supply chains can gradually generate higher-value activities beyond manufacturing itself. For Hungary, it represents an opportunity to move from assembly-based production toward innovation and knowledge creation.

Hungary’s experience demonstrates that the restructuring of global supply chains does not necessarily lead to fragmentation. Instead, it can create new opportunities for connectivity, diversification, industrial upgrading and innovation.

By focusing on logistics, manufacturing, green technologies and research cooperation, Hungary has positioned itself as an increasingly important bridge between Chinese industrial capabilities and European markets.

As discussions at the CISCE and across Europe continue to focus on economic security and supply-chain resilience, Hungary’s experience suggests that resilience can be strengthened through openness, diversification and mutually beneficial cooperation. In the era of Globalization 2.0, the most successful countries cannot be those that isolate themselves from global supply chains, but those that learn how to join them.

The author is the director of the Eurasia Center at John von Neumann University in Hungary, the former consul general of Hungary in Shanghai and a visiting scholar at Fudan Development Institute.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.