Tag Archives: Chinese-Hungarian relations

The European Union and Chinese plans for the reorganization of the global economy

Over the years I have somewhat neglected Chinese-Hungarian relations, although Viktor Orbán made clear his intense interest in China very early in his tenure. In the fall of 2010 he sent his then minister of national development Tamás Fellegi to China. After five days of negotiations Fellegi returned with little to show for his efforts to expand trade relations between the two countries. On the diplomatic front the situation hasn’t been much better. Although Xi Jinping visited Poland, the Czech Republic, and Serbia last year, he hasn’t yet paid a visit to Hungary.

Finally, after years of lobbying, the Orbán government signed a comprehensive strategic partnership with China two days ago. As Magyar Nemzet discovered, however, the agreement includes the following important sentence: “The two countries jointly promote the construction of the Hungarian-Serbian railroad in Hungary.” According to diplomats consulted by Magyar Nemzet, this means that China expects the Budapest-Belgrade railroad line to be built in exchange for a strategic partnership, something that at this point cannot be taken for granted.

In order to understand what this insertion means, we have to go back to December 2014 when Hungary, Serbia, Macedonia, and China signed an agreement on the modernization of the Budapest-Belgrade-Skopje-Athens railroad, “which will allow the fastest transportation of Chinese goods from Greek harbors to Europe.” Under the agreement, a Chinese consortium, led by the China Railway Group, was awarded a $1.57 billion contract to build the 160 km Hungarian section. The European Union has many concerns about the project. Once again, the project’s profitability is in question. The cost to Hungary would be 550 billion forints, but currently only 4,000 people travel on that line daily. If China uses the tracks to transport its goods, I assume it would compensate Hungary. Whether the compensation would be sufficient to make the line profitable I have no idea. Negotiations with the European Union about the fate of the railroad are still underway. A year ago the whole project was put on hold when infringement procedures were launched against Hungary. It is hard to predict what the EU’s final decision will be. The Chinese government has shown signs of impatience with the difficulties the Hungarian government is encountering with the European Union.

The Orbán government’s enthusiasm for this project is baffling. As far as I can see, the deal is good only for China. According to the agreement, Hungary must take out a large Chinese loan at an interest rate of 2.5% for 20 years, bringing the interest charges alone to close to 100 billion forints on the 550 billion forint cost of building a railroad line Hungary doesn’t need. Most of the work would be done by Chinese firms for a project that serves only Chinese economic interests.

Viktor Orbán among friends

Whether Hungary will again manage to convince the commissioners of the College, as it did in the case of the Paks nuclear power plant, is hard to tell. Over the last few months contradictory bits of information have reached the Hungarian media regarding the possible outcome of the case. In September Magyar Nemzet claimed that the European Commission, thanks to the good offices of Berlin, would give a green light to the project if Orbán toned down his anti-refugee rhetoric. As we know, nothing of the sort happened. In fact, the anti-Brussels, anti-migrant rant has intensified since, and Orbán’s support in the European People’s Party has been dwindling. Yet Magyar Nemzet announced just today that it got hold of a report on the communication between the European Commission and the Hungarian government, which claims that the dialogue between them is coming to a favorable end. The report also states that by the end of January the Commission was no longer having serious reservations about the project. Of course, anything is possible when it comes to the “bureaucrats in Brussels,” but I’m a bit dubious on this score given the latest developments at the Beijing Summit on China’s ambitious “Belt and Road,” a gigantic infrastructure project that would connect Asia, Europe, and Africa. There are potential roadblocks to this project. India didn’t even attend the summit, and “the EU dealt a blow to Chinese president Xi Jinping’s bid to lead a global infrastructure revolution after its members refused to endorse part of the multibillion-dollar plan because it did not include commitments to social and environmental sustainability and transparency.”

I’m sure that European leaders are serious about both the environment and transparency, but I suspect that these were not the only reasons for their refusal to partner with the Chinese leaders. Economic considerations most likely weigh heavily against the project. As The Guardian put it, “some sceptics see the plan as largely a ruse to boost China’s own economy by shifting excess industrial capacity to less developed nations and draw poorer countries tighter into Beijing’s economic grip.” Or, to quote an Indian newspaper, there is a fear that the project is no more than “a colonial enterprise.”

So, let’s return to Hungary’s attitude to the “Belt and Road” project. We know that Viktor Orbán has courted China for years to achieve a strategic agreement with China. Therefore, I was surprised to read in The Guardian’s report that “the EU’s 28 member states decided not to support a statement about trade prepared by Beijing to mark the end of the summit.” According to a high-level EU diplomat, “apparently to Chinese surprise, the EU was united on this.” AFP’s account, however, tells a different story. It reports that “several European countries—France, Germany, Estonia, Greece, Portugal, and Britain—indicated they would not sign one of the summit documents on trade.” If AFP is correct, the EU countries were not united in their opposition to Chinese plans as they were formulated in the closing document. Because of the discrepancies between the two sources, I’m unable to determine which countries, in addition to Hungary, signed the document.

The Carnegie Europe Research Center published a study titled “China’s Belt and Road: Destination Europe.” It is a sophisticated assessment of the economic and political impact of the Belt and Road project which is not easy to summarize in a couple of sentences, but I’ll try anyway. If the initiative were seen by Europeans “through the misguided lens of pure transportation and communications infrastructure, it would be appropriate for the EU to embrace it with few or no reservations.” But, the study continues, “the initiative attempts to change the rules organizing the global economy, primarily by granting China a set of tools with which it can reorder global value chains.” Such an outcome might have an adverse effect on the whole western economy. Belt and Road is often called the New Silk Road, “a name which in many respects is misleading, but it does have the advantage of reminding China watchers that the Belt and Road is above all a challenge to Europe—a challenge to which Europeans have yet to respond.”

The European Union, it seems, hadn’t given much thought until now to this particular Chinese attempt to reorganize the world economy. Viktor Orbán in this respect is ahead of his colleagues. The only trouble is that he is most likely again on the wrong side of the issue.

May 15, 2017

Chinese-Hungarian relations: An overview

Some of you surely remember that Viktor Orbán even before the elections kept emphasizing the importance of the East. He seems to be mesmerized by the rapid development of China and India, and he believes that although Hungary’s “ship is anchored in western waters the wind blows from the East.” For Orbán the East includes not only China and India but Russia as well.

The point man in this eastern orientation seems to be Tamás Fellegi. I wouldn’t be surprised if the idea of turning toward China and Russia came from him. After all, Fellegi was entrusted with the negotiations with Russia as early as July 2010, and in December he also took over the negotiations with China.

Fellegi has been spectacularly unsuccessful in dealing with Russia. He would travel to Moscow and return empty handed. The sticking point was the Hungarian treatment of a Russian company that owns 20% of MOL but has no voting rights. Without going into the details and getting lost in the intricacies of Russian-Hungarian relations, one can pretty well predict that there will be no great understanding between the two countries in the foreseeable future.

Fellegi seems to be more successful in Beijing. Feelers were put out as early as August 2010 when Zsolt Semjén, deputy prime minister, and Márton Gyöngyösi (Jobbik), the deputy chairman of the parliamentary committee on foreign affairs, visited China. There Semjén in his usual expansive style articulated Hungary’s willingness to give preference to China in economic matters. Soon enough, in December, Viktor Orbán himself visited Shanghai, where he conducted “serious negotiations” with Wen Jiabao, his Chinese counterpart. At this meeting the question of Chinese participation in the modernization of the Hungarian railway system was discussed. A week after these discussions between Wen and Orbán, Fellegi was named commissioner (kormánybiztos) in charge of Chinese-Hungarian affairs. He immediately went to China to discuss the details of economic cooperation and afterward he gave a press conference in which he indicated that he had reached an understanding with the Chinese negotiators. The Chinese, according to Fellegi, “understood and appreciated the fact that Hungary wants to place Chinese-Hungarian relations on new foundations.” At this point Fellegi put a lot of emphasis on the fantastic business opportunities offered in China to Hungarian businessmen.

Although Fellegi denied that Beijing would buy up Hungary’s sovereign debt, he did mention “future financial cooperation with Chinese banks and the Chinese government.” He was also pretty sure that one of the “Chinese super-express trains would be delivering passengers” in Hungary soon enough.

For Hungary it is certainly important to develop economic ties with China, but according to the latest news the relations the Orbán government is developing with China go beyond investment, trade, and finance. Fellegi, who is again in China, gave a press conference at the Hungarian Embassy in Beijing. His most important message was that “there are no conflicts between China and Hungary, and as far as political goals are concerned the two countries are close to each other which means a good foundation for long-term strategic cooperation.”

Well, that’s quite something. China’s and Hungary’s “political goals” are very similar? That sounds pretty frightening to me. We know what’s going on in China when it comes to internal dissent. Let’s hope that Hungary will not try to emulate its Chinese friends in this respect. As far as so-called “strategic cooperation” is concerned, that is also a pretty loaded term. I suggest that you look up instances with the help of Google where the concept is mentioned. There have been strategic cooperation agreements signed and sealed between two countries that created a close political relationship between the two countries. Did Fellegi use the term loosely or is Hungary willing to have a very special political relationship with China? Fellegi, who received his Ph.D. in political science at the University of Connecticut, should be familiar with the terms used in international relations. One thing is sure, Fellegi admitted that he and his Chinese hosts discussed “political matters.”

And what about the non-political matters?  Although a few months earlier Fellegi was talking about Chinese super-express trains rumbling on Hungarian rails, by now the expectations are a great deal more modest. The Hungarian negotiators are trying to modernize the Hungarian Railways, which by itself may take a decade or more. However, China will have a piece of the pie: the CEO of MÁV signed a contract with the China Railway Construction Corporation which will take part in the modernization of the Hungarian railway system. In addition, they will also supply locomotives. Global Times, a Chinese paper, reported that the Chinese company will also “improve the structural qualities of the railway stations.”

But China Railway Construction Corporation is not the only business that might benefit from a presence in Hungary. China’s Huawei Technologies Co. will build its global supply center in Hungary. Further issues, such as financial cooperation and project capital raising, were also discussed by Fellegi and Zhou Xiaochuan, governor of the People’s Bank of China. Reuters reported today that Hungary and China are examining ways to cooperate on issuing Hungarian debt in the Chinese market. No word yet on opportunities for Hungarian businesses in China.

Economic ties can be a positive development, but what bothers me is the more than a hint of political cooperation and common political goals between China and Hungary.

April 22, 2011