Budapest’s Key Role in Chinese New Silk Road

09/03/2019

China is knocking to Europe’s door and Hungary is playing a key role in this strategic partnership. How Budapest could be the natural gateway to EU-China import-export?

 

China is investing in Europe. Over the past decade PRC has demonstrated an ever-increasing interest in both the countries and regional dynamics of Eastern Europe.  As a part of its ambitious Belt and Road Initiative (BRI), Beijing has sought to infuse its foreign relations with infrastructure projects that imbue countries in need of economic transformation to pivot towards their development aims. One country that has been a focal point of European debate over the specter of Chinese economic engagement, is Hungary.

 

©Unsplash. As a champion of Chinese investment in Central and Eastern Europe, Hungary has long been an important partner for China in the latter’s “going-out” strategy.

 

Is the ascendance and expansion of China an opportunity or threat? Does China naturally look for partners for mutual benefits and development or does it seek to control the world? Probably both. The enhanced relationship between China and Hungary has generated concern among European commentators and policy watchers worried about Budapest opening. 

In the past two decades the ascent of China was one of the major trends in the world economy. Today, the fast-growing Chinese economy is already the second largest in the world with an outlook to take the first place from the US within ten years. Moreover, China is already the world’s largest trading nation. Within the framework of its new land and maritime silk road initiative, China is now reaching out to Europe. China is an important trade and economic partner too and the new “Made in China” is going global.

 

The “Three B”: from Beijing to Brussels trough Budapest. Hungary wants to be a strategic partner in the heart of Europe.

 

Trade with China has been growing dynamically in the past decade. Actually, China is the largest trading nation in the world and one of EU most important trade partner. Beijing is European top partner for EU imports, and after the United States, is the second largest partner for exports. In this framework Budapest is leading the way in EU-China BRI cooperation.

As a champion of Chinese investment in Central and Eastern Europe (CEE), Hungary has long been an important partner for China in the latter’s “going-out” strategy. Budapest was home to the first renminbi (RMB) clearing centre in CEE – a fact that, along with the launch of the first Chinese RMB and Hungarian forint debit card in Europe, serves to highlight the country’s preeminent role in RMB internationalisation. 

Hungary was also the first European country to sign a memorandum of understanding on Belt and Road co-operation with the Chinese mainland, an indicator of the strong Asian orientation of its policies on trade and international affairs. The hallmark project of China’s BRI – a 350-km high-speed railway linking the capital cities of Hungary and Serbia – will also improve Hungary’s land-sea connectivity.

 

The increasing number of direct air cargo connections between Hungary and Belt and Road economies like Hong Kong, Qatar and Turkey is likely to enhance the country’s status as a popular trans-shipment hub in the region. 

 

Hungary’ strategic location has played a major part in its economic development. It is on the eastern border of the EU/EFTA Schengen Area and can therefore play a pivotal role in the regional distribution channels of EU countries. Hungary has close economic relationships with many of its neighbours and near-neighbours, including Austria, Bosnia and Herzegovina, Croatia, the Czech Republic, Italy, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia and Ukraine, which  has made the country a popular transit point for East-West intermodal freight forwarding in the CEE region. 

The Hungarian rail network is also undergoing expansion and re-organisation as it focuses on further modernisation. Despite an ongoing EU probe into its financing, the hallmark BRI project – the Budapest-Belgrade rail link – is scheduled for completion by 2018. It is designed to improve Hungary’s connections with seaports in the Adriatic and Mediterranean Seas, including the Greek Port of Piraeus operated by China’s COSCO Shipping.

 

©Unsplash. Budapest is developing Danube ports. These hubs will play an important role in promoting better logistic connections.

 

Although Hungary is landlocked, it has overcome this disadvantage by developing major inland ports along the Danube River at Győr-Gönyü, Budapest, Dunaújváros and Baja, which boast an advanced infrastructure and access to the Black Sea. Furthermore, the country is at the crossroads of two Trans-European Transport Network (TEN-T) corridors and has the third-highest road density in Europe, enabling easy access not only to all parts of Hungary but also to its neighbouring countries.

Together with the increasing number of direct air cargo connections with Belt and Road economies such as Hong Kong, Qatar and Turkey, Hungary’s excellent transport links are enhancing its status as a popular trans-shipment hub in CEE. The amount of cargo being handled by Budapest Airport increased by 23% in recent years and the airport is expanding to meet the increased demand.

 

China has signaled its willingness to support Hungary’s national development strategy by further integrating it into the BRI. 

 

Hungary is by far the largest incubator of Chinese outbound direct investment (ODI) among the CEE members of the “16+1” cooperation framework. The “Opening to the East Strategy”, started in 2010 by the Hungarian Prime Minister Viktor Orbán as a way of opening new markets in Asia after the European financial crisis, coincided rather fortuitously with China’s “going-out” strategy. China’s economic and cultural exchanges with Hungary have been considerably enhanced ever since the official launch of the “16+1” framework in 2012 and the BRI in 2013.

Hungary is also active in promoting inter-cultural and people-to-people exchanges with China in fields such as tourism and the arts. At the end of 2018, China Eastern Airlines stated that the company will launch a direct flight between Shanghai and Budapest next summer while few days ago Budapest Airport confirmed the news.

 

©AirChina.cn. Chengdu. Among the cities in China, Chengdu become one of the top three sources of outbound Chinese tourists.

 

Until now the Budapest-Asian market has been underserved, but this new service means Asia will become more accessible than ever, introducing an additional 41,000 seats to the Asian market during the season. Adding Shanghai to its network this summer will see Budapest provide more connections to several new Chinese cities, plus other Asian destinations including Hong Kong, Singapore, Osaka Kansai, Seoul Incheon and Tokyo Narita.

Chinese investments in Europe grew rapidly in the last few years and now China is knocking to Europe’s door, but the division among EU Member States on different issues poses a risk and China has not been shy to use this division to its own advantage. Today Budapest was chosen as natural gateways to Chinese goods and with its BRI, Beijing expressed its intention for a closer cooperation. 

The best European, and also Hungarian, strategy, therefore, is developing our own strategies along our own economic and political interest and negotiate lasting deals with China whenever our interests are aligned because China can be a great economic partner.

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