(Yicai) April 28 -- The Tisza Party led by Peter Magyar won the election with a two-thirds absolute majority in the Hungarian parliament on April 12, ending the 16-year rule of Viktor Orbán's Fidesz Party.

The new government now faces important tasks: unlocking over EUR18 billion (USD21 billion) of frozen EU funds while maintaining crucial Chinese investments and preserving Hungary's position as the largest investment gateway for China in Europe.

The political transition in Hungary will have a direct impact on China's investments in Europe. From 2020 to 2024, Chinese companies have committed to investing EUR11.7 billion in Hungary, much higher than the EUR3.5 billion (USD4.1 billion) in France, EUR2.5 billion in Spain, and EUR1.8 billion in Germany.

Orbán's government implemented a national economic project priority mechanism that allowed simplified approval processes and circumvented some reviews by EU regulators. This provided certainty for Chinese capital, attracting major projects, such as Contemporary Amperex Technology's EUR7.3 billion battery factory in Debrecen and BYD's EUR2 billion vehicle assembly plant in Szeged, which are nearing completion, scheduled to achieve large-scale production this year.

The victory of the Tisza Party reflects the voters' rejection of perceived corruption and rent-seeking politics. To access the frozen EUR18 billion, the new government must achieve 27 'super milestones,' which include core institutional developments, such as the restoration of judicial independence and audits of public procurement. This means that the national economic project priority mechanism will face substantial modifications.

Meanwhile, the EU regulatory environment is tightening continuously. The Foreign Subsidies Regulation requires Chinese companies that receive state support to make mandatory declarations. The revised Foreign Direct Investment Regulation will be fully implemented this year, covering key technological sectors, such as batteries and artificial intelligence. Moreover, the European Commission has drafted the Industrial Accelerator Act, which sets new thresholds for industries in which a single external country has a market share of over 40 percent.

Under Orbán's administration, there were virtually no substantial mechanisms for reviewing FDI into Hungary, so the new government will need to build this system from scratch.

Nevertheless, initial signals indicate that Magyar will adopt a balanced strategy. After winning the election, he said he would review Chinese investments, but emphasized that the goal is to ensure compliance rather than block the progress of projects. He expressed the willingness to visit Beijing and reiterated Hungary's openness to Chinese capital, provided it adheres to European standards.

From a macro perspective, Europe is facing dual pressures of deteriorating transatlantic relations and rising energy prices. In the battery and electric vehicle sectors, there is no domestic capacity to replace Chinese investments, which objectively provides Hungary with a strategic window to maintain its attractiveness to China.

Hungary's true test lies in whether it can rebuild institutional credibility and unlock EU funds while retaining sufficient cost and location advantages to ensure the continuous inflow of Chinese capital. The industrial foundations in Debrecen and Szeged have already been established, and Magyar's task is to incorporate them into the European compliance framework, rather than starting from scratch.

The authors of this article are Shen Jianguang, chief economist at JD.Com, and Bo Jiale, research director at JD.Com.

Editor: Futura Costaglione