At the beginning of November I wrote about Viktor Orbán’s trip to Shanghai where he met the Chinese prime minister. In a fairly short meeting Orbán expressed his desire to expand economic and financial relations with China. A month later Tamás Fellegi, minister of national economic development, was named commissioner in charge of Chinese-Hungarian affairs. I might even have made a crack about this appointment’s being rather unfortunate. Earlier Fellegi was named commissioner in charge of the Russian-Hungarian negotiations and see what happened there. A disastrous visit by Viktor Orbán to Moscow, several postponed trips to the Russian capital by Fellegi. And today’s news is that the Russian oil company Lukoil is retiring from its wholesale business in Hungary because of the extra tax levies that it finds too high, making its operation a losing proposition. They are keeping about 100 filling stations, however.
So, anyway, Fellegi went off to Beijing on December 6. He was entrusted with expanding Chinese-Hungarian economic and commercial cooperation. He was to pay special attention to Chinese investment in Hungary. Fellegi spent four days in the Chinese capital, and on his return he gave a very optimistic account of the negotiations and the prospects. The Hungarians tried to convince the Chinese to import “Hungarian technology.” For the life of me I can’t think of any specifically Hungarian technology the Chinese might need. But surely the main emphasis had to be on Chinese investment in Hungary. Indeed, there were “difficult negotiations” concerning MALÉV, the Hungarian airline that was just rescued from a bankrupt Russian company. Although negotiations were difficult, the optimistic Fellegi continued, “they are on the road to success.” They talked about Chinese investment in the Hungarian railroads that are in truly rotten shape. The Hungarian delegation also met with the chairmen of four large construction companies with expertise in building airports.
At the time that the MTI report appeared the last sentence escaped my attention, but now I remember that one of the sanguine Hungarian ministers talked lately about developing the most important air traffic hub in the region in Budapest. And there was something else that didn’t mean much to me at the time. The chairman of the Center for Sovereign Debt, Gyula Pleschinger, was a member of the four-man delegation to Beijing.
Today it all became clear when Tamás Fellegi gave an interview to Index, an Internet paper. Fellegi’s name appears often enough in the papers but this is the first time that I encountered an interview with him. What is my impression? Not the best. He is brusque, antagonistic, and not at all diplomatic. However, he seems to be devoted to Viktor Orbán. When the journalist pressed him for his opinion on the media law, he could have avoided answering the question by saying that it is not his bailiwick. But no, he decided to defend it. When he was asked whether he agreed with every move of the government in the last six months, his answer was an unqualified yes. I guess a member of the cabinet cannot say anything else, but I think there are ways to avoid giving straight answers. Most likely a more experienced politician would have been able to do so, but Fellegi is not an experienced politician.
As the matter of fact, I don’t think that he has any real background in such delicate international economic and financial negotiations. Especially not with such old hands at the game as Russia or China. After finishing law school in Hungary, he got a Ph.D. in political science at the University of Connecticut. His connection to Viktor Orbán and Fidesz goes back a long way. As a young instructor at the Budapest Law School he taught courses in the college where Fidesz was born. He was one of the editors of the periodical published by the students called Századvég. After his return to Hungary in the mid-1990s he embarked on a business career. He bought shares in several media outlets. But I don’t think that negotiating about Chinese-Hungarian financial strategic cooperation is his strength.
What else is not his strength is giving judicious interviews. When asked about the rumors circulating that Hungary is hoping to involve China in the financing of Hungary’s sovereign debt, he decided to expand on his negotiations in Beijing. According to Fellegi, the topic of “strategic financial cooperation” between the two countries was first brought up by the Chinese prime minister. Viktor Orbán welcomed the idea and thus the main thrust of the Chinese-Hungarian negotiations was defined. He told his interviewer that he also met the chairman of the Chinese Central Bank, the president of the Chinese Export-Import Bank, and the chairman of the Chinese State Investment Bank. A Chinese delegation will be coming to Budapest in January where the negotiations will continue. When the journalist inquired whether it is a good idea to give special privileges to the Chinese in purchasing Hungarian sovereign debt that might make Hungary too dependent on China, Fellegi snapped back: “Why? Is China any worse than any other country?” He reiterated that Hungary, which earlier broke off talks with the IMF, wants to finance its debt from the markets.
A few hours later two Chinese journalists were at the doorstep of the Chinese Central Bank where they inquired whether China is actually planning to be a major player in Hungary as Fellegi indicated. Reuters explained that “Hungarian Development Minister Tamas Fellegi was quoted as saying on a local news website index.hu on Wednesday that China may buy Hungarian debt following talks between Hungarian Prime Minister Viktor Orban and his Chinese counterpart Wen Jiabao in Shanghai in late October” but “China’s central bank declined to comment on a report that it is considering financing various Hungarian projects, including buying some Hungarian government debt.”
China is extremely eager to invest in Europe. On December 23, 2010, a Chinese Foreign ministry spokeswoman said that the country was willing to help countries in the euro zone return to economic health and will support the International Monetary Fund bail-out package for the zone. The whole of Europe is of interest to China because after all the European Union is a huge market for Chinese goods.
China is sitting on outsized foreign-exchange reserves (a total of $2.648 trillion at the end of September) and is looking for ways to diversify out of U.S. Treasuries and earn a higher return. European debt, especially marginal debt, is particularly attractive to the Chinese. Last week they agreed to invest four to five billion euros in Portuguese bonds to help Portugal refinance 15 billion euros worth of debt due to expire in April.
Moreover, China is looking for investment deals all over the world, so I have no doubt that Hungary remains on its radar screen. But the Chinese are very tough negotiators, and I fear that in comparison Tamás Fellegi is a babe-in-arms.