Dr. Mohammad Salami‏‏

On 8 July, Hungarian Prime Minister Viktor Orbán visited China. His visit was a further indication of the Eastern European country’s recent desire to connect with the East, especially China, to secure major foreign investments.Orbán’s visit came just two months after Chinese President Xi Jinping visited Budapest on 8 May, which resulted in the signing of 18 cooperation agreements between the two countries. During that trip, China <a href="https://www.aljazeera.com/news/2024/7/9/hungarys-orban-meets-chinas-xi-in-mission-to-end-russia-ukraine-war" rel="noopener noreferrer" target="_blank">upgraded</a> its ties with Hungary to an "all-weather, comprehensive strategic partnership." This is one of China’s highest designations for foreign relations and is only applied to relations with three other countries: Belarus, Pakistan, and Venezuela.After Orbán came to power in 2010, Hungary was China’s first target for investment in the Eastern European region. Hungary also supports Xi Jinping’s Belt and Road Initiative (BRI). Through adopting a strategic policy of "Eastern Opening," Hungary has shifted bilateral relations with China from a political focus to greater engagement in trade and investment.In 2023, Chinese investment in Hungary <a href="https://www.bbc.com/persian/articles/ck5gn58ryr1o" rel="noopener noreferrer" target="_blank">was equivalent</a> to its investments in all other European countries combined. Beijing’s investments accounted for three-quarters of total foreign investment in Hungary. It seems that China intends to penetrate Europe via Hungary by investing in infrastructure such as the Budapest-Belgrade railway and in modern industries such as the manufacture of electric vehicle (EV) batteries. As a result, Western countries have become concerned about the scope of China’s economic interests in Hungary.China’s neutral stance on the Russian invasion of Ukraine <a href="https://www.atlanticcouncil.org/blogs/econographics/china-is-losing-eastern-europe/" rel="noopener noreferrer" target="_blank">strained</a> China-EU relations. This caused China to lose European markets as Central and Eastern European (CEE) countries increasingly turned away from China. In 2022, the Baltic States exited the CEE-China 17+1 cooperation mechanism. The Czech Republic and Romania also banned Chinese companies from building nuclear power plants in their countries, while CEE countries signed a memorandum of understanding with the US to restrict Chinese companies such as Huawei from building 5G infrastructure in the region.Amidst ongoing geopolitical competition with the US, China seeks to maintain positive relations with Europe through building ties with Hungary. Hungary has therefore become China’s "gateway" to the EU, and Beijing’s investments in the country are of great importance to Chinese politicians.Budapest is Beijing’s best option to conquer European markets. One current joint venture is the construction of a 160-kilometer section of the Budapest-Belgrade high-speed railway line, which was <a href="https://www.osw.waw.pl/en/publikacje/osw-commentary/2024-04-12/chinas-european-bridgehead-hungarys-dangerous-relationship" rel="noopener noreferrer" target="_blank">launched</a> in 2014 and is managed by the Chinese COSCO Shipping Corporation. This project is part of China’s BRI and is worth around $2.5 billion USD. About 85 percent of the funds for the project come from a Chinese Exim Bank loan to the Hungarian government.China is also <a href="https://balkaninsight.com/2024/05/10/xis-visit-to-hungary-long-on-symbolism-short-on-cash/" rel="noopener noreferrer" target="_blank">involved</a> in renovating the largest highway border crossing between Hungary and Serbia, and which is also an external Schengen border. China’s engagement with such projects indicates that it intends to strengthen the BRI in the Balkans and Hungary, which it hopes will become a gateway for Chinese products into Western Europe.China is currently caught in a tariff war with the US and could also find itself in economic disputes with the European Commission, which is under US pressure to impose heavy tariffs on Chinese goods. China has made progress in the production of EV batteries, even as European competitors in Germany, Poland, and Sweden also manufacture these batteries. China therefore turned to Hungary to establish a key production and logistics base for its automotive industry within Europe and also so that technology companies such as Huawei could operate without risking European tariffs.Despite warnings and pressure from the US, Budapest has continued to pursue economic ties with China. It is continuing to develop a 5G network with Huawei, which strengthens Hungary’s position in the Western Balkans. For example, Hungary’s 4iG Group has pursued extensive <a href="https://www.4ig.hu/montenegro-government-and-4ig-group-entered-into-partnership" rel="noopener noreferrer" target="_blank">cooperation</a> with Montenegro’s telecommunications sector with plans to develop the 5G network. Some of the other Visegrád 4 (V4) countries (Poland and Slovakia, but not the Czech Republic) are open to Chinese investment because they depend significantly on the automotive industry. However, other EU member states are <a href="https://chinaobservers.eu/beijing-seeks-gateway-to-europe-via-budapest/" rel="noopener noreferrer" target="_blank">concerned</a> about Hungary’s increasingly close ties with China.Beijing’s partnership with Budapest has raised concerns about high levels of debt and whether Hungary is becoming a Chinese colony. Orbán’s critics object to Hungary’s economic dependence on China. In recent years, Hungary has become the main defender of China’s interests in the EU.Between 2016 and 2022, Budapest <a href="https://www.osw.waw.pl/en/publikacje/osw-commentary/2024-04-12/chinas-european-bridgehead-hungarys-dangerous-relationship" rel="noopener noreferrer" target="_blank">used</a> its veto power six times to block EU Council decisions condemning China and has repeatedly opposed EU initiatives that would undermine China’s economic interests. For example, in December 2023, Hungary refused to sign the European Wind Charter, which calls for protecting the EU wind industry from the unfair practices of Chinese manufacturers.European critics accuse Hungary of expanding China’s media clout in Eastern Europe. Four of the 18 bilateral cooperation agreement signed in May 2024 were <a href="https://chinaobservers.eu/beijing-seeks-gateway-to-europe-via-budapest/" rel="noopener noreferrer" target="_blank">related</a> to media cooperation. Beijing intends to shape Hungarian public discourse. This is clear from the way in which Hungarian ministries have interacted with the mainstream media, which is controlled by the Chinese Communist Party (CCP). China also sees the Hungarian government’s willingness to spread CCP narratives about China’s global role as an indication that Budapest will defend Chinese discourses in the EU. This is particularly important since Hungary will assume the rotating presidency of the Council of the European Union starting in July 2024.Hungary’s involvement with China has prompted security concerns in Europe. NATO countries are worried about closer cooperation between China and Hungary under the security <a href="https://www.reuters.com/world/unusual-move-china-offers-back-hungary-security-matters-2024-02-19/" rel="noopener noreferrer" target="_blank">agreement</a> that the two countries signed in February 2024. EU countries are afraid that Orbán will pursue illiberal measures to gain new supporters in Europe. In North Macedonia, for example, the victory that Nikola Gruevski’s party secured last month <a href="https://euobserver.com/eu-and-the-world/ar1d02efff" rel="noopener noreferrer" target="_blank">boosted</a> Hungarian regional influence, especially since Orbán had granted former Prime Minister Gruevski asylum after Hungarian embassy staff smuggled him into Hungary.However, Budapest is content with the current situation because it needs Beijing’s investments in light of EU budget cuts. Likewise, China appreciates Hungary’s support as its "gateway" to Eastern Europe. However, it remains to be seen how Hungary will react as EU authorities ramp up pressure on this partnership.

Why is Beijing Increasing its Investments in Hungary?