Hungary and the new Silk Road

China plans to invest 900 billion euros in the 'New Silk Road' project. While many EU countries are skeptical about the project, Hungary is the first European country to sign a cooperation agreement with China in 2015.  

It is the largest infrastructure project since the Marshall Plan. China is planning to write 900 billion euros in its "One Belt, One Road" project (OBOR), which aims to promote the expansion of trade routes between the country and Europe and is therefore called 'New Silk Road'. It is about railways and highways, ports and airports, power stations and pipelines. To discuss this gigantic project, representatives from over a hundred countries met in mid-May 2017, including many heads of state and government: Recep Tayyip Erdogan and Vladimir Putin. But also here: Hungary's Prime Minister Viktor Orbán.


Neue Seidenstraße

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However, while many EU countries are facing the Chinese plans with a wait-and-see skepticism, Hungary has already plunged into the scene. As early as 2015, Hungary was the first European country to sign a cooperation agreement within the framework of the OBOR project. Orbán now sees a new world order: 'The old model of globalization is coming to an end, the East has been aligned with the West, and a considerable part of the world has had enough to be taught by the Western industries about human rights and market economy' said the Prime Minister in Beijing against Hungarian media representatives.

The Hungarian government expects great benefits from cooperation with China. It hopes that Hungary will become an important hub on two of the three routes of the new Silk Road - a trade center that is home to many foreign investments, mainly from China itself. In order to obtain easier access to the EU 's internal market, Hope of the Hungarian government - Chinese companies will at least finish some products in Hungary. To this end, the Hungarians are expecting increased export possibilities for their products to Asia in the opposite direction.

A central project of the new Silk Road in Hungary has already been launched: the railway line Belgrade-Budapest will be renewed, the journey time for the approximately 350 kilometers from the current eight to two and a half hours will be shortened.

Keleti Bahnhof in Budapest
Train station Keleti in Budapest. Exit and end station for the Budapest - Belgrade express train. 
Image rights: IMAGO

The costs for the rehabilitation of the approximately 160 km long Hungarian sections were originally set at EUR 467.5 billion (EUR 1.5 billion), but this figure has already been corrected to EUR 550 billion (EUR 1.8 billion). 85 percent of this sum is financed by a Chinese loan, and the construction work itself will run a Chinese consortium. After completion, the route is to be operated by a joint venture: the Hungarian State Railways MÀV would have a 15 per cent share of this, the remaining 85 per cent holding its Chinese counterpart.

But whether this huge investment is worthwhile for Hungary is at least questionable, says the conservative, but not necessarily government-friendly day newspaper 'Magyar Nemzet'. The route currently uses only 4,000 passengers a day. The credit from China has a 2.5 percent interest rate and runs for more than 20 years - but the profits make Chinese companies. However, the Pallas Athéné Geopolitical Institute, which is financed by the Hungarian National Bank, expects that the benefits of the railway project will increase the costs: "The developed rail link will increase Hungary's ability to raise capital. This, particularly in combination with cheap labor, could make Hungary attractive as a location for Chinese assembly works. ' "One Belt's participation in One Belt, One Road could open up new prospects for Hungary, reduce its unilateral dependency and strengthen its role as a hub between East and West."

However, it is not yet in dry cloths: in February 2017, the EU Commission has launched an official investigation: Hungary has overturned EU directives on the tendering of such large-scale projects when awarding the order for the conversion of the line.
At all, in Brussels, the idea of ​​a new Silk Road is quite skeptical. OBOR primarily serves Chinese interests, for example, to reduce the overcapacity of Chinese companies. There is also the fear that, under China's leadership, there will be neither transparent tenders, nor acceptable environmental and social standards. That is why the EU representatives in Beijing refused to sign a planned document on trade. But it is mainly China's geopolitical ambitions, which make Europeans nervous. For OBOR will expand China's influence mainly on its poorer neighbors, but also on the entire world economy.
The so-called '16 + 1 cooperation ', which China launched in 2012, was already suspected in Brussels. This initiative, which involves eleven Eastern European EU countries and five Balkan countries, is intended to improve the co-operation of the participating countries in many areas, especially in transport, investment, finance and science. In Brussels, it was already feared that meetings of individual EU members with China could undermine the Union's common foreign policy.
Viktor Orbán, however, are concerned about these concerns, but they do not care much. He seems to feel more comfortable in China than in the EU. It was only recently that massive criticism of his plans for the NGOs to come to a close and the closure of the private elite university CEU came back from Brussels. From China, on the other hand, critical demands for the rule of law in Hungary are not to be expected. The relationship with China is based on mutual acceptance, Orbán swarmed in Beijing in May 2017 that there was no teacher and no student.
from Thyra Veyder-Malberg