Prime Minister Viktor Orban with Chinese President Xi Jinping (2018). Source here.
On the occasion of the parliamentary elections of April 3, 2022, important not only for Hungary, but also for Romania and the European Union, LARICS has started a wide-ranging series, spread over several episodes, on the political and strategic realities in the neighbouring country. We will try to unravel the recent developments in Hungary, focusing on the main characters and the team around them. In this issue, we will complete the dossier on the relationship between Budapest and Beijing, evoking other dimensions of this deepening collaboration. Part one of this series can be read here, part two here, part three here, part four here, part five here, part six here. The English version of this episode can be read HERE and the Hungarian version HERE (LARICS).
International analysts argue that although Hungary is the main destination for Chinese investment in Central and Eastern Europe, investment flows have slowed down in recent years and are mainly focused either on infrastructure (such as railways or continental ports) or acquisitions (such as hotels and assembly plants), creating sustainable jobs in new employment sectors.
Solar energy is a promising new area for Chinese investment, especially as Hungary strives to reduce emissions and comply with EU green energy mandates. China National Machinery Import and Export/CMC of China completed (2019) construction of a $120 million solar power plant in Kaposvar, first announced in 2019.
Hungary, with its increasing connections with China since the early 2000s, has become one of the most vulnerable countries in the region in terms of Chinese influence under the Orbán Viktor government, according to analysts.
Hungary’s vulnerability is due to relatively weak state institutions, which are largely controlled by an increasingly authoritarian ruling party and the limited voice of civil society. The ease with which Beijing has facilitated elite capture plays an important role in China’s ability to cultivate key decision-makers, who in turn are eager for better relations with their Chinese counterparts.
For Budapest, Beijing has become a key partner for diversifying its economic policy away from Europe after the 2008 global financial crisis. Over time, Orbán has begun to shift Hungary’s foreign policy strategy towards Beijing as well. The Hungarian government is using China as leverage in dealing with Brussels and to align itself with the Eurosceptic sentiment in the country.
Oligarchic control over the state or government over the domestic media prevents alternative views of Beijing, allowing both Budapest and Beijing leaders to hail the relationship as bilaterally profitable.
The positive media coverage helps offset the limited impact that the Chinese projection of soft power influence has had so far in the country. Hungarians have slightly negative views of China’s international influence and see Beijing primarily as a source of funding.
Hungary has become one of Beijing’s strongest supporters in the EU. It was the first EU country to sign the Beijing BRI. Since 2012, it has also been a member of the 17+1 format and hosted its annual summit in Budapest in 2017.
Unlike some of his regional counterparts, Orbán attended the virtual 17+1 Summit (09.02.2021) hosted by China, personally praising Xi Jinping for the assistance China provided to Hungary during the COVID-19 pandemic.
- Two of the most prominent and controversial Chinese investors in Hungary – Bank of China and Huawei
The regional headquarters of the Bank of China – Central and Eastern Europe/CEE/Bankof China for Central and Eastern Europe is in Budapest, where it has served since 2003 as an intermediary to facilitate Chinese investment flows and finance infrastructure.
Bank of China (Central and Eastern Europe/CEE) set up its own stand-alone Hungarian subsidiary, Bank of China (Hungária), in 2014, which subsequently expanded into Austria and the Czech Republic.
The National Bank of Hungary / Magyar Nemzeti Bank has consented to the Bank of China (Hungária) becoming a regional clearing and settlement house in yuan /RMB. Hungary was also the first Central European country to issue RMB-denominated sovereign bonds in 2016.
Huawei arrived in 2005, establishing its main European supply centre in Hungary. From there, it distributes products in Central Asia, Europe, the Middle East, North Africa and Russia, and is the country’s second-largest mobile supplier, enjoying a 30% market share in mobile phones and 20% in tablet purchases.
Huawei also owns several assembly plants and wants to expand its presence in Hungary’s telecom and internet infrastructure development sectors (like its rival ZTE). Both companies are sensitive points for the US and many of Hungary’s partners, including the EU and NATO, although there is little public pushback against Huawei in Hungary.
In addition, despite pressure from the Trump administration to scale back Huawei’s activities, the Orbán government announced in 2020 the establishment of a new Huawei R&D centre in Hungary. Fidesz voters are now coming out pro-Beijing – a strange approach for a party with anti-communist movement origins
- Chinese soft power influence
There are currently about 20,000 ethnic Chinese living in Hungary, some of whom arrived through a now discontinued golden visa scheme similar to the one in Greece – which the Orbán government promoted from 2013 to 2017.
The Chinese Academy of Social Sciences established the China-CEE Institute think-tank in Budapest in 2017. This is the first Chinese-sponsored policy research institution in the region, its aim being to establish links with academic institutions in Central and Eastern Europe. It has a broad research mandate covering political, social, technological, economic and governance issues across the region, not just Hungary. Many of its reports are written by the same small group of European scholars, with Chinese managers and editors overseeing and funding their work. The institute’s social media presence remains weak, with just 175 followers on LinkedIn and 400 followers on Twitter, although the institute posts the same feed on all its social media platforms.
The main Confucius Institutes in Hungary are located at: Eötvös Loránd University in Budapest, Szeged University, Miskolc University and Debrecen University. There is also a Confucius Institute for Traditional Chinese Medicine at the University of Pécs, focused on learning Chinese language and traditional healing methods.
All five institutes serve as libraries, language schools, and cultural centres – generally places where Hungarian citizens, especially young people, can gain greater exposure to Chinese film, art, history, calligraphy, and sports, as well as research and preparation for foreign educational opportunities in China.
The Association of Chinese Students and Academics/ Kínai Diákok és Oktatók
Chinese cultural institutions active on Hungary’s territory
5 Confucius institutes within Hungarian Universities
A bilingual Hungarian-Chinese school in Budapest
A think thank: China-Central and Eastern Europe Institute in Budapest
A traditional Chinese medicine unit: Heilongjiang University of medicine from China organizes every year in Budapest courses at the Faculty of Health Sciences of Semmelweis University
Various cultural and friendship organisations among which: Hungarian-Chinese Friendship Association, Hungarian-Chinese Cultural and Art Association
Szövetsége in Pécs, an official organisation of Chinese students with branches all over the world, also exists in Hungary, although its various structures do not seem very active.
China has focused on cultivating potential future elites, often presenting them with business or educational opportunities. Beijing offers study tours for Hungarian professionals, including journalists and academics, to learn about China, as well as lucrative scholarship programmes for high school, college and graduate students. Graduates of these programs have continued to advocate for closer political, trade and cultural ties.
One example is Levente Horváth, the National Bank of Hungary’s chief advisor for China, who graduated from the prestigious Fudan University in Shanghai and coordinated its alumni organisation in Hungary. He has coordinated efforts to create a Fudan campus in Hungary by 2024, which would be the first branch of a Chinese university in the EU.
The impetus for Fudan University’s expansion into Hungary was based on a financial training exchange in 2017, in which the National Bank of Hungary sent a delegation to Fudan. It was followed by the creation of a joint master’s programme between Corvinus University of Hungary and Fudan in 2019. In-depth negotiations on the establishment of a fully-fledged Chinese campus began in 2020, after the Central European University/CEU, founded by Hungarian-born American George Soros in 1991, was forced to move to Vienna (in December 2018) after pressure from the Orbán government.
If completed, Fudan University’s Hungarian campus will certainly be well positioned to enhance Chinese soft power influence, to cultivate a growing generation of elites and improve educational ties with Chinese academic institutions, as CEU has previously done with its US counterparts, according to experts.
Construction costs for Fudan University in Budapest are high, currently estimated at around $1.8 billion, far exceeding recent annual state allocations for all higher education in Hungary (generally between $900 million – $1.5 billion). The largest part of these costs (about $1.5 billion) will be financed by a loan from the China Development Bank to be repaid within fifteen years. The Hungarian state will finance the rest, but will donate a $2 million land to the campus.
The alleged leader in building the campus, China State Construction Engineering Corporation/中国建筑集团有限公司, an entity sanctioned by the US Department of Defence for close ties to the People’s Liberation Army/PLA and by the World Bank for corrupt practices. It is yet another example of how Chinese projects seem to profit from state capture in Hungary, often at the expense of Hungarian taxpayers.
It is unclear where the initial student body of 5,000-6,000 will come from, as in 2017 it was reported that there were only 250 students studying Chinese at Hungarian universities. The proposed university branch would likely draw on an international student population, including students from China. Some Hungarian academics have expressed concern that the Fudan University project will dilute the state budget for higher education, help stifle academic freedom and lead to an exodus of intellectuals.
The replacement of CEU with Fudan University is a powerful statement of changing political atmosphere, with broad implications for academic freedom. The Hungarian Academy of Sciences has so far proved resistant to Chinese proposals, although recent efforts by the Orbán government to privatise universities and turn them into foundations controlled by polyarchists close to the prime minister are likely to reduce academic freedom by themselves.
The Fudan project has also stirred controversy: the liberal mayor of Budapest, Gergely Karácsony, has publicly opposed it and pledged to block or at least postpone construction; city officials have marked the perimeter of the Fudan campus for much-needed student housing for Budapest’s existing higher education institutions; civil society activists have begun to unite against the project, pointing to the high costs, heavy debt burden and lack of any public commitment from the government or China. In a recent poll, about two-thirds of Hungarians said they opposed the project, and thousands protested against it (05.06.2021), the first large-scale protest since the lifting of COVID-19 restrictions. The mayor of Budapest ordered four streets around the planned campus to be renamed Free Hong Kong Road, Uyghur Martyrs’ Road, Dalai Lama Road and Bishop Xie Shiguang Road (after a persecuted Chinese Catholic priest), a move that sparked a backlash from Beijing. However, public anger is galvanising opposition against both the project and Orbán, forcing the government to suspend it for the time being.
Hungary’s opposition appears ready to use Orbán’s non-transparent ties with China against Fidesz party in the general election on April 3,2022.
*C. Ioana is a graduate of the Master in Security Studies of the University of Bucharest and a LARICS expert on Hungarian issues.