To what extent do cultural dimensions matter? Institutional determinants of Chinese FDI in Europe with Hungarian case studies

Abstract This study examines the European distribution of Chinese foreign direct investment (FDI), with a particular focus on the influence of cultural distance alongside structural and institutional factors. Employing a mixed-methods approach, the research is built on three methodological pillars: the analysis of official Chinese FDI statistics, the comparison of Kogut–Singh and Mahalanobis distances calculated using Hofstede’s dimensions, and the qualitative analysis of interviews conducted with executives of four Chinese companies operating in Hungary. The results indicate that the presence of Chinese capital in Europe is highly concentrated. Luxembourg attracts investments as a financial centre, while Western European countries leverage their stable institutional environments, and the Central and Eastern European (CEE) region is gradually integrating into the Chinese investment network. In terms of the population-proportionate number of Chinese enterprises, Hungary ranks in the top half of the 36 countries examined, standing as the only CEE nation in this tier. The research confirms that no significant positive relationship exists between cultural distance and Chinese FDI distribution; countries culturally closer to China record lower FDI values than Western European states with more advanced institutional settings. Interview findings reveal that strategic and economic factors, such as EU market access, infrastructure, and logistical advantages, are decisive in investment decisions. The study concludes that structural and institutional factors are paramount in shaping the European distribution of Chinese capital, whereas cultural distance merely plays a supplementary role.