Hungary is looking East, to Russia and China

With the prime minister’s trip to China, it seems an appropriate time to look briefly at Hungary’s relations with two economic heavyweights to its east. First, relations with Russia. Hungary, like most of Europe, is heavily dependent on Russia as a source of energy, especially natural gas. In earlier days with different economic rules, Hungary found a ready market for pharmaceuticals, agricultural goods, and electronics in the Soviet Union. Of course, the world has changed, and the new Russia in a global economy no longer has to buy often inferior products from the former socialist countries. They can buy whatever they want anywhere in the world as long as they have the money. During the first few years after the collapse of the Soviet Union, the Russians didn’t have money to buy much of anything. But now, according to Forbes Magazine, Moscow can boast that it has more billionaires than any other city in the world. Clearly Russia, with its vast natural resources, is a major player in the world economy. Whatever one thinks of Putin’s power plays to bring more and more of these resources under the control of the state, Russia remains an economic force to be reckoned with, one of the BRIC countries (Brazil, Russia, India, China).

When Orbán was prime minister, he distanced himself from Russia, both politically and economically. With the defeat of the Fidesz, there was a policy change. Prime Minister Péter Medgyessy considered it important to change course and made a visit to Moscow. The closer economic and political relations with Russia continued under Ferenc Gyurcsány. Vladimir Putin made an official visit and had lunch with the prime minister’s family in their home.

It is, of course, also important to have economic ties to China. The Hungarian MSZP prime ministers’ travel schedule may fall far short of Hank Paulson’s 73 trips to China when he was at Goldman Sachs (he is now U.S. Secretary of the Treasury), but they do have a few more things to worry about than investment banking. The point is that Medgyessy visited not only Russia but also China. Gyurcsány intensified his efforts; this is his second visit to Beijing. His first trip was a "working visit," but the current one is a state visit with all the pomp and circumstance that goes with it.

Yesterday morning Gyurcsány took part in the discussions of the Hungarian-Chinese Economic and Business Forum and, later on, he opened the Week of Hungarian Tourism and Gastronomy in the elegant Shangri-La Hotel in Beijing. The afternoon was taken up by discussions with the vice president of China and later with Prime Minister Wen Jiabao. There are hopeful signs that closer economic relations are on the horizon.

A Hungarian industrial park will be built in the city of Shenyan. And, according to reports, the Chinese have agreed to establish a distribution center in Budapest from where Chinese goods will reach other Eastern European countries. The new distribution center, called the Center of Chinese Quality Goods, will be the second such regional distribution center for Chinese products. The first was established in Dubai. The center will be huge. About a thousand Chinese firms will be represented, and the center will be 200,000 square meters. If I calculate right, that’s over two million square feet, roughly the equivalent of forty-five American football fields!

By the way, there is already a fairly large Chinese population in Hungary. Perhaps about 20,000. To serve this community there are two bilingual (Hungarian and Chinese) schools.

Although there are two Chinese shopping centers in Hungary (the Asia Center and China Smart), most Hungarians identify Chinese products with the inferior goods offered by Chinese street vendors. Many people don’t realize the dominance of Chinese-made goods in the West (Wal-Mart being the clearest case) with the happy consequence for the consumer of importing deflation. And, of course, politics will paint closer economic ties with China in the blackest terms. In fact, the propaganda against it has already begun. The Fidesz is against any more Chinese investment in Hungary, and the party’s "experts" on education have raised their voices against the Hungarian government’s effort to attract Chinese students to Hungarian universities. Today they accused the government of offering places to Chinese students tuition-free. I don’t know whether this is true, but, even if it is, it would only be beneficial to the country. In general, Chinese students are talented and hard working and, after spending some time in the country, they would be excellent ambassadors for Hungary.