Chinese Companies in Hungary Under the New Government: What Has Changed, and How to Respond

Written interview. Interviewee: Dr. Balázs Czudar, founding and managing partner of Czudar DHH Law Firm, Hungarian/EU strategic partner of DHH Beijing Law Firm (德和衡律师事务所). Interviewer: Cheng Tao.

I. Executive Summary

Hungary’s change of government in April 2026 is not an anti-China turn — it is a regulatory reset. The new Hungarian government has explicitly welcomed Chinese investment, subject to three conditions: full compliance with Hungarian and EU environmental, health and safety rules; tangible benefits for the Hungarian economy; and the inclusion of Hungarian companies in the supply chain.

The most important changes:

The era of fast-track permitting is over. The “priority investment” fast lane has been abolished; standard, full-scope environmental impact assessments and genuine public consultation are back. Project timelines must be planned accordingly.

Stricter supervision. A standalone environment ministry is being established, along with a dedicated battery-industry regulator; the era of token fines is over, and violations carry real consequences — up to and including suspension of operations.

A stronger EU dimension. The notification obligations of the EU Foreign Subsidies Regulation (FSR), FDI screening, and the reforms undertaken to unlock frozen EU funds together require more transparent, better-documented operations.

Focus on employment and labour. The agency-based guest-worker model is being restricted; direct employment is not subject to the same restriction, but strict compliance with local wage, working-time and visa rules has become a general expectation.

Local embeddedness matters more than ever. A transparent, constructive relationship with local communities and municipalities is now a genuine risk-management tool.

If a company faces regulatory action (fines, suspension, investigation), Hungarian law provides real tools to protect its rights: administrative appeal and judicial review with an application for immediate legal protection; a remediation and compliance programme agreed with the authority to enable a supervised restart; and, where necessary, separate criminal-defence representation. The fastest route back to operation is almost always demonstrable compliance — with professional legal representation.

In one sentence: the new system is stricter but more predictable — and for prepared investors who take compliance seriously, it is a competitive advantage.

II. Full Article — Questions and Answers

1. Many Chinese investors are worried about the change of government. Is this an anti-China turn?

No — and it is important to see this clearly. What is happening is a regulatory reset, not a political turn against China. In his very first public statements, the new Prime Minister explicitly welcomed Chinese capital, described China as one of the world’s most important economic partners, and made clear that closing existing factories is not the goal. What is changing is not who may come, but how: the expectation is full compliance with Hungarian and EU rules, within a predictable and transparent framework. In the long run, this favours precisely the serious, well-prepared investors — because it gives them a stable position that is very hard to attack.

2. What has changed, concretely, in permitting and investment preparation?

The most important change is that the old fast lane is gone. In recent years, many major investments proceeded under a “priority project of national economic importance” designation (based on Act LIII of 2006), through simplified and accelerated procedures, with several permitting decisions taken in a centralised manner. The new government is restoring the standard process: full environmental impact assessment and genuine consultation with authorities and the public. In addition, a standalone environment ministry is being created and, according to official announcements, a dedicated battery-industry supervisory authority will begin operating in the second half of the year. The practical message is simple: project timelines must be planned realistically, with longer permitting periods.

3. The new government has set three conditions for investments. What do these mean in practice?

The three conditions are: (1) full compliance with Hungarian and EU environmental, health and safety requirements; (2) tangible benefits for the Hungarian economy; and (3) the involvement of Hungarian companies as suppliers. In practice, this means the investor must build compliance and the local value chain into the project already at the planning stage — not as after-the-fact window dressing, but as an integral part of the project. Companies that approach it this way will find it is not a burden but a competitive advantage: such an investment is far harder to attack, politically or legally.

4. What are the key environmental rules a Chinese manufacturer must now comply with?

The backbone of the framework consists of a few clearly defined pieces of legislation. The general foundation is Act LIII of 1995 on the general rules of environmental protection (the Environmental Protection Act), including the “polluter pays” principle. Large industrial plants typically operate under an integrated environmental use (IPPC) permit, the procedure for which is governed by Government Decree 314/2005 (XII. 25.) — the key point being that actual operations must never deviate from the conditions set out in the permit. The protection of soil and groundwater is governed by Government Decree 219/2004 (VII. 21.), with defined contamination limit values; where pollution occurs, the remediation process is prescribed by Government Decree 90/2007 (IV. 26.). All of this rests on EU foundations, in particular Directive 2010/75/EU on industrial emissions. The essence: continuous self-monitoring, sampling and reporting on time are no longer formalities but conditions of operation — and lapses can have immediate and serious consequences.

5. How does the end of fast-track permitting affect project planning?

Companies must expect longer permitting periods accompanied by genuine public consultation. At first glance this looks slower; in reality it is safer: a permit obtained through the standard procedure is much harder to overturn, and there is far less risk that operations will later be restricted or suspended because of a deficiency discovered after the fact. My advice to every new entrant: a realistic timeline, early engagement with the authorities, and full resolution of environmental, fire-safety and water-protection requirements before construction begins. Today, speed lies not in bypassing the process but in flawless preparation.

6. What new EU-level obligations should Chinese companies expect?

The framework is tightening from several directions. One of the most important is the EU Foreign Subsidies Regulation (Regulation (EU) 2022/2560, FSR), which imposes notification and transparency obligations on companies that have received state support, in connection with certain transactions and public procurements. In addition, Hungary’s own FDI screening regime remains in force (based on Act LVII of 2018), and the EU-level FDI screening framework also applies. An indirect but important factor is that, in order to unlock frozen EU funds, the government has committed to institutional reforms — which will make the entire permitting and public-procurement environment more transparent. Compliance here is above all a matter of documentation discipline: a transparent, verifiable presentation of subsidies, ownership structure and financing. It is a manageable task, but it requires proactive preparation.

7. There is much talk about guest workers. What has changed, and what has not?

Precision is especially important here, because misunderstandings abound. The restriction introduced primarily affects workers arriving through labour-hire agencies under “guest worker” residence permits. Employees hired directly by large manufacturers under employment-purpose permits are not subject to the same restriction. At the same time, strict compliance with local labour-law, wage, working-time and visa rules has become a general expectation — several investors already require their contractors to confirm this in the form of compliance declarations. My advice is simple: review the employment structure and the entire subcontracting chain from a legal perspective — before the authorities do it for you.

8. Why has the relationship with local communities and municipalities become more important?

Because regulatory tightening comes hand in hand with greater publicity and public scrutiny. Today, how a major investment is perceived depends heavily on whether local residents and the municipality experience it as a partner or a burden. Proactive, transparent communication — regular updates, sharing monitoring data, creating local jobs, involving local suppliers — is not mere PR but genuine risk management: it materially reduces the likelihood of regulatory and political pressure building up. A company with strong local embeddedness starts from a far stronger position in any potential dispute; a company that isolates itself will stand alone at the smallest incident.

9. Suppose a company faces regulatory action — a fine, suspension, an investigation. What legal tools does it have to protect its rights?

Several tools are available in parallel, and they should be used in a coordinated way.

First, administrative remedies are available against the authority’s decision: where the law allows, an administrative appeal (under Act CL of 2016 on general public administration procedure), otherwise a direct action before the administrative court (under Act I of 2017 on the code of administrative court procedure). One crucial detail: suspension orders in the environmental and fire-safety fields are typically enforceable immediately, so litigation alone does not stop enforcement — a separate application for immediate legal protection must be filed (Section 50 of the administrative court procedure code), and the decision should be challenged on grounds of legality and proportionality.

Second — and in practice this is the fastest route back to operation — an integrated remediation and compliance programme agreed with the authority: correcting the identified deficiencies, involving independent experts, following a documented timeline, and then achieving a supervised restart. In the new regulatory environment, this is what the authorities expect, and this is what actually works.

Third, if criminal proceedings are also opened — typically under the Criminal Code provisions on environmental damage or violations of waste-management rules (Sections 241 and 248) — the company and the executives concerned need separate, professional criminal-defence representation. Cooperating with the authorities and exercising the right of defence are not mutually exclusive: both must be done, in parallel, and done well.

The law, then, provides real tools. But results come not from volume, only from fast, precise and coordinated professional action.

10. Is there a “safety net” at the level of international investment protection?

Yes, such a framework exists: the bilateral investment treaty (BIT) in force between Hungary and China guarantees, among other things, fair and equitable treatment and protection against arbitrary or discriminatory measures. Realistic expectations are essential, however: good-faith environmental or fire-safety enforcement, applied equally to everyone and without discrimination, does not amount to a treaty breach or expropriation. The investment treaty is therefore a real but last-resort instrument — primarily against genuinely arbitrary or discriminatory treatment. In everyday practice, compliance combined with domestic legal remedies is the effective path.

11. What should a Chinese company entering Hungary now do differently?

The most important shift in mindset: compliance must be built in when the structure is designed, not retrofitted later. In practice this means: thorough legal and environmental due diligence already when selecting the site and the activity; mapping the permitting path and setting a realistic timeline in advance; a lawful design of the employment and supplier model; early, correct relationship-building with local authorities and the municipality; and appropriate insurance and guarantee arrangements. And perhaps most importantly: the local legal adviser should be involved from the first moment of market entry, not after a problem erupts. The cost of prevention is a fraction of the cost of crisis management.

12. In summary: what are the five steps every Chinese investor should take now?

In short:

Compliance self-audit — environment, fire safety, water protection, labour law — before anyone else does it for you.

Realistic planning — with longer permitting periods and early engagement with the authorities.

Local embeddedness — a transparent, constructive relationship with authorities, the municipality and residents.

EU readiness — documentation discipline for FSR and FDI screening obligations.

A standing legal partner — one equally at home in Hungarian and EU law, able to respond quickly and precisely.

As the Hungarian and EU strategic partner of DHH Beijing, this is precisely our role: guiding Chinese investors through this new — stricter but more predictable — system, from prevention to effective legal representation. For companies that arrive prepared or act in time, Hungary remains one of the best gateways into Europe.