Hungary: the flagship of China in Europe?

By Gatien Du Bois & Magdi Birtha | 29 June 2015

To quote this document: Gatien Du Bois & Magdi Birtha, “Hungary: the flagship of China in Europe?”, Nouvelle Europe [en ligne], Monday 29 June 2015, http://www.nouvelle-europe.eu/node/1905, displayed on 12 December 2017

China and Hungary seem to live a honeymoon state. Business, as well as political interests, characterizes the current situation. Budapest wants China to consider Hungary as the gateway to Europe, and from Hungary, they can then further expand their presence regionally. Prime Minister Viktor Orban considers relations with China of great importance, while bilateral economic and trade relations are becoming increasingly close: a situation that causes mixed feelings among Hungary's neighbours and inside the EU institutions.

China and Hungary during the Soviet regime

Until 1956, relations between the People's Republic of China and the People's Republic of Hungary were warm though not too close, as Hungary was considered as part of USSR's sphere of influence. Hence, relations of China with Hungary were shaped by the status of the relationship between the two communist giants for a long time.

In 1953, when Joseph Stalin died, Mao Zedong considered himself as the leader of the International Communist Movement. After the denunciation of Stalin's use of repression in 1956, Nikita Khrushchev started the process of "de-Stalinization" resulting in Mao Zedong's perception of the soviet leader as revisionist. Feeling that USSR is moving away from the "real" Marxist-Leninist doctrine, China is adopting an anti-revisionist position. The Sino–Soviet split was confirmed in 1960.

During the 1956 Hungarian revolution, the power struggle between Beijing and Moscow for the leadership of the communist world was ongoing, but it was not yet the right time for a direct and open confrontation with the USSR. Consequently, the events of 1956 were seen and condemned as an attack against the great socialist family by the imperialists and counterrevolutionaries. The People's Republic of China urged the USSR to intervene and the Central Committee of the Communist Party of the Soviet Union to take a stand on the Hungarian unrest. From November 1956 onwards, Beijing pushed for no withdrawal of soviet troops from Hungary. At the outset of the disturbance, the doors of the Chinese embassy were locked and staff were restrained from all direct contact with Hungarians (no help to the civilians whose life was in danger). China also played a decisive role in consolidating the János Kádár government. The latter will be the instrument of soviet repression until his retirement in 1988.

In other words, Beijing was encouraging the repression by Moscow of the 1956 anti-soviet revolution. Moreover, documents have proved that, at that time, the Chinese ambassador was regularly asked by Kádár's advisors to give his opinion on questions regarding domestic and international politics. Of course, everything changed after the collapse of the Soviet regime. But Beijing will never forget that after WWII, Budapest was among the first capitals to recognise the People’s Republic of China.

China is welcome! On Hungarian politics towards China since 2004

Since Hungary joined the EU, relations between China and Hungary developed up to the point that they are now considered of great importance by the two countries.

The turning point of Chinese investment in Central and Eastern Europe (CEE) was the Olympic Games organised by the People's Republic of China in 2008. As early as 2009, Hu Jintao's successor-in-waiting, Xi Jinping, visited Hungary. This was preceded by Dr. Péter Medgyessy's visit to China in 2003 - the first Hungarian Prime Minister to visit in 44 years. Chinese-Hungarian relations became even deeper with Viktor Orban’s visit in China at the end of 2010. Regular meetings are held between ministers and high-level officials (even defence officials) to discuss joint business deals in transportation, aviation and energy, as well as political and cultural cooperation. The official website of the Chinese Ministry of Foreign Affairs revels in the close high-level exchanges and enhanced political trust between Hungary and China. "The Chinese-Central European and Chinese-Eastern European regional cooperation is of utmost importance for China and they really appreciate that Hungary acts as a flagship in these relations" Péter Szijjártó, Minister of Foreign Affairs and Trade, said in 2014. As he put it "we would like Chinese companies coming to Europe to consider Hungary as their base and also Hungary to become the main transit route of Chinese goods intended for the European market in the long run". According to Chinese officials, the Hungarian government’s “Opening to the East” policy and the Chinese “Economic silk road” concept reinforce each other. "Hungary is a bridgehead in Chinese-European cooperation", Foreign Minister Wang Yi said at a meeting with his Hungarian counterpart, Peter Szijjártó, in 2014. Hungarian officials emphasised that China is the most important Asian market and the 10th most important global trade partner of Hungary.

Nevertheless, unlike Hungary, many Central European countries have mixed feelings regarding closer economic ties with China. Hungary's initiatives are thus sometimes viewed with fear by its neighbours and by the EU. Hungary is a member of the Visegrad Group, the loose political grouping of the Czech Republic, Poland, Slovakia and Hungary, which has the same voting weight inside the EU as France and Germany. Its members are generally considered very sensitive to human rights issues. China may thus be trying to use Hungary as an example to its neighbours to enhance their support towards China, by showing the many advantages it may bring them. It is interesting to note that in 2011, concomitantly with the closing out of Hungary's term as Rotating Presidency of the EU, Beijing granted a credit of one billion euro to Hungary through the China National Development Bank to advance joint projects. Moreover, the purchase of Hungarian bonds by China is a means to ensure the funding of Hungary at least in the medium-term, according to Viktor Orban, even though Hungary can finance itself on the markets. In the same vein, Viktor Orban stated in April 2015 that Hungary has decided to join the China-led Asian Infrastructure Investment Bank (AIIB).

These initiatives have to be considered as primarily resulting from the political wills of both capitals. In the mind of Orban's supporters, a way to loosen the grip of the "European Commission's dictatorship" is for the Hungarians to look towards China. They would have appealed to Russia, but Russia is perceived as a threat to historic Hungary, and Arab sheiks are not a solution either as the attitude towards Muslims in the country is ambiguous. Therein, we are not surprised by the unusual proposal made by a group of politicians from Orban's party "Fidesz" to grant residency permits - and in the long term - citizenship to foreigners who buy government bonds of Hungary worth 250,000 euro or more. Naturally, this initiative was met with criticism in the EU as this practice is completely contrary to EU law.

However, the policy pursued by Viktor Orban towards China is also contested inside the country from the far-right "Jobbik" party to liberals and socialists who do not want to fight with the EU. For the Jobbik party, this is a contradiction with the nationalistic line seeking to protect the Hungarian nation and its Christian values. Equally, among the Hungarian population, close ties with China do not just happen on their own. The Chinese population in Hungary is seen as a burgeoning but insular community. Asian immigrants began streaming in shortly before the fall of the Communist regime. Visa requirements were abolished between the two countries in 1988. A feeling among the population is that Chinese newcomers generally keep to themselves and refuse to assimilate. Community members who don’t speak Hungarian are the majority and very few of them take advantage of the bilingual Hungarian-Chinese schools set up in 2004. According to figures from the Immigration and Naturalisation Office, there were 11,000 legal Chinese residents in Hungary in 2010, but the real figure is estimated at 20,000 or even 30,000 most of whom live in Budapest, which represents the biggest Chinese colony in the region.

Chinese presence in Hungary

These mixed feelings do not prevent more and more Chinese investments appearing in Hungary. In 2015 Minister Péter Szijjártó defended the political line of the government by saying the "Eastern opening" policy is successful. According to the Hungarian Ministry of Foreign Affairs and Trade, about 5,000 Chinese companies are operating in Hungary with domestic investments worth over 2.8 billion. Let's review them.

Due to the quickly developing relationship between Hungary and China, Air China started a direct flight from Budapest to Beijing  for tourism and business purposes. In 2014 the number of travellers (including business and leisure) increased by 19% and is expected to double in the next 5 years. In May 2014 the China - Eastern-Central Europe Tourism Regional Centre was opened in Budapest to improve collaboration between Chinese Tourism Authority and the national tourism agencies of the CEE countries. Levente Magyar, State Secretary of the Hungarian Ministry of Foreign Affairs and Trade, said "the number of Chinese tourists coming to Hungary doubled over the past five years and rose to 90,000 in 2014", adding that "China has become Hungary’s largest tourist source country in Asia". The opening of this direct flight was communicated by the government as one of the successful elements of the government’s "Eastern opening" policy.

Beijing is targeting the CEE's emerging markets strategically and China's view of Hungary is as a hub for Chinese products in the EU market. In this vein, China wants to transform Szombathely airport into a major European base for cargo. The railway companies Zeleznice Srbije, Chinese Railway Corporation and Hungarian State Railways Corporation are part of a modernisation project of the Belgrade-Budapest railroad connection. The work should begin by the end of 2015 and take two years. This project is closely linked to the "One belt, one road" Chinese strategy.  Its aims is to ease the transit of Chinese goods through the Balkans from Greek port of Piraeus (owned and run by the Chinese company China Ocean Shipping Co.), in order to reach the Central European and Black Sea markets.

In 2009, an office of the China Investment Promotion Agency (CIPA) was opened in Hungary, the first abroad. What are the main areas in terms of Chinese capital investments in Hungary? Chinese businessmen are active in various areas. In the field of gastronomy: tons of Hungarian pork meat are exported to China. Chinese enterprises in IT, telecommunications and services are present in Hungary. For example: ZTE Corporation, Lenovo and Huawei, which decided recently to open a distribution centre for Europe in Hungary that will be the second largest in the world. Not to mention sectors such as electronics (with the presence since 2002 of the state-owned enterprise Hisense Co., Ltd.), research and development, chemistry (Wanhua Group bought Hungarian chemical maker Borsodchem, BBCA’scitric acid factory in Szolnok), mechanical industry (Canyi's European centre of lamp production). In line with Beijing's development strategy, Chinese businessmen are especially encouraged to invest in the energy and resources sectors and infrastructure development. In 2011, Xanga Investment and Development Group acquired the licence to operate Debrecen International Airport for 75+25 years. Its aim is "to develop the infrastructure and the services of the airport so that it can become one of the most prominent and the most competitive regional international airport (both with regard to passenger and cargo traffic) within the Schengen Zone in the European Union".

The presence of China in Hungary is also noticeable in terms of cultural and educational diplomacy. By the end of 2013, 24 pairings of friendship cities between China and Hungary (including Budapest-Shanghai) were visible. The Confucius Institute in Budapest was founded in 2006 and is active in 9 towns and in 35 institutions. According to the website of the institute, it organises 50 cultural events a year (including the reception for Prime Minister Wen Jiabao in 2011) and counts more than 2,000 students a year. More recently, the Confucius Institute and the University of Szeged signed a declaration of intent to establish a China centre that will focus on education, innovation and foreign relations. Clearly, Beijing assigns the institute a role in strengthening Hungarian-Chinese tourism, education and cultural ties. Delegations of Chinese middle-school students and university students are making learning tours to Hungary. In addition, the cooperation between the University of Pécs and the Hebei United University led to the creation of the fourth Confucius Institute in Hungary, "which, besides the dissemination of Chinese culture, aims to promote traditional Chinese medicine, dating back thousands of years". In 2011, the Wanhua Industrial Group contributed to establishing Miskolc University’s China Centre.

Conclusion

Why is Hungary an important piece of the Chinese mahjong game in Europe? Just as the other CEE EU members, Hungary represents a dynamic, largely developed, less saturated economy, which is directly connected to the EU common market. Its geopolitical location (roads, railways) on the "New silk Road" strategic project developed by Beijing and the initiative of Orban's government to increase bilateral cooperation make Hungary attractive to Chinese investments.

Although Beijing rebuffed Viktor Orban's enthusiasm for closer cooperation with China because of his strained ties with the EU, the People's Republic of China is delighted to have a reliable promoter of its interest in Europe. China sees Hungary as a useful flagship inside the EU. Thus, the longer Europe’s economy stumbles on in its recovery, the more enticing Chinese overtures will be to Hungarian economy and more broadly to the CEE region.

 

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