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2.5 Potential trade opportunities

Overview

Although Hungary, with a population of only 10 million, is not the largest among the other new East European and Mediterranean countries that acceded to the EU on 1 May 2004, the country is widely recognised as one of the best-prepared to join the EU. The integration into the EU has not only facilitated the country’s overall trade development, but bolstered its leading role in business, finance and trading in Central and Eastern Europe (CEE) on the back of its relatively well-established business environment and infrastructure. Given its trade openness, Hungary is not immune to the global recession started in 2008 when its external trade peaked at US$217 billion. Between 2004 and 2009, Hungary recorded a compound annual growth of 7% in trade, while the figure (a CAGR of 17%) will look much more encouraging if we skip the recession year 2009.



 

Market-wise, the EU is Hungary’s largest trading partners, accounting for 79% of the country’s total exports and 69% of total imports in 2009. This is due mainly to processing production arrangements conducted by EU companies, especially those from Western Europe, in the country. Increasingly, EU companies are using Hungary as one of their manufacturing bases for processing production, while a substantial number of companies from the US and Asia are investing in Hungary’s manufacturing sector in order to tap the Western European market. Germany is by far Hungary’s largest market, followed by Austria, France and Italy. Meanwhile, Slovakia, Poland, Romania and the Czech Republic are Hungary’s major trading partners in Eastern Europe, accounting for more than one-fifth of the country’s external trade.


Hungarian imports by country, 2009 (Total: US$77.4 billion

 

 


Total imports by selected countries in 2009

 

 

US$ million

% Growth 08/09

% Share in 2009

1      

Germany

19,508

-29.8

25.2

2      

Russia

5,647

-44.4

7.3

3      

China

4,951

-19.2

6.4

4      

Austria

4,706

-30.0

6.1

5      

Netherlands

3,696

-24.9

4.8

6      

France

3,513

-25.8

4.5

7      

Slovakia

3,232

-15.9

4.2

8      

Italy

3,209

-30.5

4.1

9      

Poland

3,185

-26.1

4.1

10   

Czech Republic

2,634

-36.1

3.4

Source: HCSO

Hungarian exports by country, 2009 (Total: US$83.1 billion)

 

 


Total exports by selected countries in 2009

 

 

US$ million

% Growth 08/09

% Share in 2009

1      

Germany

21,386

-26.0

25.7

2      

Italy

4,696

-18.5

5.7

3      

UK

4,534

-10.3

5.5

4      

France

4.489

-11.5

5.4

5      

Romania

4,406

-23.3

5.3

6      

Slovakia

4,166

-18.4

5.0

7      

Austria

3,777

-28.8

4.5

8      

Poland

3,111

-27.7

3.7

9      

Netherlands

3,105

+0.6

3.7

10   

Russia

2,907

-24.9

3.5

Source: HCSO

Hungary’s importers and distribution channels are relatively simple. Usually, large-sized distributors also act as importers. While medium-sized distributors/importers buy their products from Eastern and Western Europe, a number of large-sized companies go directly to Asia to source a wide range of consumer goods and industrial inputs. Their customers include local wholesalers and those from other CEE countries, as well as some large-sized retailers of consumer goods, and medium- and large-sized manufacturers of industrial items.

Following Hungary’s EU accession, many foreign retailers, especially those from Western Europe, have marched into the market, engendering a new branch of importers and distributors with extensive distribution networks across Europe. The rising popularity and continued influx of foreign retailers have not only brought a wider assortment of goods for Hungarian consumers, but the country’s retail/distribution development. Nowadays, medium- and large-sized companies in Hungary, especially retail chains, have started to source directly from Asia, especially the Chinese mainland. Thanks to Hungarian importers’ enhanced ability to place larger orders with overseas suppliers and the increased willingness of Asian suppliers, including Hong Kong companies, to accommodate small orders in view of fierce competition, the scope of direct sourcing is bound to extend to a wider range of goods, holding great promise for Hong Kong’s exports.

Hungary is by far the largest market for Hong Kong in the CEE, followed by Russia, the Czech Republic and Poland. Hong Kong’s total exports to the country grew robustly by 54% from US$774 million in 2004 to US$1,193 million in 2008, although sales dropped to US$855 million in the recession year 2009. Unlike the trade patterns with other Eastern European partners, Hong Kong’s exports to Hungary, due mainly to the robust industrial production and therefore strong input demand in Hungary, are mainly industrial inputs. The largest export item in 2009 was telecommunications equipment and parts, accounting for 48% of the total export value. Other major exports include electric power machinery and parts (11%), electrical apparatus for electrical circuits (10%), parts and accessories of office machines/computers (6%) and equipment for distributing electricity (4%). While Hong Kong’s consumer goods exports so far account for only a small portion of sales to the country, there should be niches for Hong Kong exporters in Hungary where production of consumer goods is still relatively limited.

Source: Census & Statistics Department, HKSAR Government

The performance of Hong Kong’s exports of consumer goods to Hungary has been faring well in recent years, thanks partly to the country’s EU accession and relatively stable economic development. Above all, electronics (i.e. finished electronic products and parts and components) are the major export category, accounting for nearly 90% of Hong Kong’s export to the Hungarian market in 2009. Other major export items include gifts and premiums, toys and games, household electrical appliances and timepieces.

Hong Kong’s total exports of selected products to Hungary

(US$ million)

2006

2007

2008

2009

Value

Growth

Value

Growth

Value

Growth

Value

Growth

Total exports

980

-1%

1,152

+18%

1,193

+4%

855

-28%

Electronics^

861

+3%

1,007

+17%

1,070

+6%

764

-29%

Telecom equipment

19

+33%

279

..

296

+6%

210

-29%

AV equipment

464

-17%

226

-51%

283

+25%

221

-22%

IT equipment

97

+45%

123

+26%

123

+1%

75

-39%

Fashion products

19

+47%

14

-28%

22

+62%

20

-9%

Clothing

12

+113%

8

-33%

10

+15%

9

-3%

Footwear

4

+11%

3

-32%

4

+20%

2

-40%

Travel goods and handbags

3

-24%

3

-3%

9

+260%

9

-4%

Gifts and premiums*

25

+32%

31

+23%

34

+11%

19

-44%

Toys and games

16

+46%

21

+32%

15

-27%

8

-46%

Household electrical appliances

8

+67%

17

+108%

10

-40%

3

-72%

Watches and clocks

5

+110%

5

+10%

7

+40%

3

-62%

Jewellery

0.4

+84%

1

+54%

1

+48%

1

-31%

.. Over 1,000% increase

^ Includes finished electronic products and parts and components of electronic products
* Includes items covered in other categories
Source: Census & Statistics Department, HKSAR Government

Hong Kong as a platform for Sino-Hungarian trade

China’s trade with Hungary has been robust in recent years, mainly driven by a surge in Chinese exports to Hungary. Total trade between the two countries soared by 119% or a compound annual growth rate (CAGR) of 17% from US$3,111 million in 2004 to US$6,804 million in 2009, of which Chinese exports rose by 102% or a CAGR of 15% and Chinese imports surged by 218% or a CAGR of 26%. Against the backdrop of this encouraging trade pattern between Hungary and the Chinese mainland, Hong Kong should ride on its extensive experience and networks built through years of trading with the Chinese mainland to assist Hungarian companies to tap into the gigantic Chinese market. In the meantime, Hong Kong companies, given their knowledge of European markets and consumers, can serve as a springboard for mainland enterprises to enter the Hungarian market and use it as a gateway to other EU markets.

Bilateral trade between Hungary and China

 

Source: China Customs

In essence, apart from providing Hungarian enterprises with in-depth and first-hand market information about the Chinese market, Hong Kong companies can be good partners for new-to-the-market Hungarian firms to enter China. On the other hand, Hong Kong companies should also stay updated of the movements of Chinese enterprises entering or investing in the Hungarian market. So far, Chinese investment in Hungary flows mainly into fields such as telecommunications, trade, wholesale and retail, banking, aviation, hotel and catering, logistics, real estate, consultancy and manufacturing, while Hungarian companies mainly invest in sectors such as waterfowl breeding, sewage water treatment, real estate, and production of building materials in China.

The growing presence of Chinese manufacturers in Hungary would translate into a sustained demand for industrial supplies and services. For example, Huawei Technologies, which has a supply centre in Hungary assembling and distributing telecommunications equipment to Europe, the Middle East and North Africa, consumed US$1 billion worth of imports of spare parts and components in 2009. Also exemplified by the presence of the Bank of China (the bank’s only presence in Eastern Europe) and the opening of an office of the China Investment Promotion Agency (CIPA) in Budapest in February 2010 (the first CIPA office abroad), the expanding bilateral economic relations between China and Hungary will give rise to greater demand for industrial supplies such as electronic parts and components and services such as finance, business consultation and logistics, at which Hong Kong companies excel and have an edge in supplying.

 

Content provided by Hong Kong Trade Development Council
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