Hungary turns to China for railway funding amidst EU fund freeze

As reported by the investigative portal VSquare, the Hungarian government, led by Prime Minister Viktor Orban, is facing economic problems and a significant portion of EU funds is still blocked. In light of Chinese leader Xi Jinping's upcoming visit to Hungary, the government is turning to China for new railway investment funding.

The portal discusses two new railway projects integral to the Chinese Belt and Road Initiative (BRI), in which Hungary is the sole participating European Union country. These projects include a rapid connection between Budapest airport and the city centre and the long-planned V0 railway line designed to divert freight trains from Budapest.

VSquare points out that Russia initially expected to fund the V0 railway, but the invasion of Ukraine disrupted those plans. Due to a tight budget and financial difficulties, the project was put on hold. VSquare noted on Monday, citing a source close to the Hungarian government, that a Chinese loan appears to be the only viable alternative with the government effectively giving up on unlocking EU funds and with Hungary's finances depleted.

VSquare, quoting an EU country's ambassador in Hungary, conveyed that the Orban government is making its stance clear by habitually threatening the European Commission with an increased reliance on Chinese financing should cohesion funds remain unreleased.

VSquare adds that it's improbable that Hungary will meet the necessary criteria to unlock the rest of the cohesion funds. In December, the European Commission released £8.7 billion of the £18.8 billion allotted to Hungary for 2021-2027, acknowledging improvements in the country's judicial system. However, the remaining funds and the National Recovery Plan, valued at over £8.5 billion, are still frozen.

Hungary's strategic location within the EU and its stable political and economic landscape makes it a significant partner for China, evaluated Eurasia Center and China expert Levente Horvath, quoted by the Index portal. The analyst added that the shared perspectives on global order evolution and economic collaboration have further solidified the Hungary-China relationship.

Moreover, BYD, Tesla's major competitor from China, recently declared its plans to establish its first European passenger car factory in Szeged, southern Hungary. Around mid-2022, Chinese CATL announced its over £7.2 billion investment in a battery factory with a 100 GWh capacity in Debrecen, eastern Hungary.

During his visit to China last week, Hungarian Foreign Minister and Trade Minister Peter Szijjarto stated that they stand against any actions by the European Union that would impede economic cooperation between Europe and China, particularly in the Chinese electric vehicle sector.

During his Beijing visit, Szijjarto also revealed that FiberHome, a leading Chinese network and telecommunications equipment supplier, would establish its largest European factory in Hungary to produce optical cables. This investment is expected to amount to around £22 million.

On Monday, the Chinese Ministry of Foreign Affairs spokesman, Lin Jian, announced that the People's Republic of China's leader, Xi Jinping, will visit France, Serbia, and Hungary from 5 to 10 May. In Hungary, his visit, scheduled from 8 to 10 May, comes at the invitation of President Tamas Sulyok and Prime Minister Orban. According to reports, Xi will be accompanied by a 400-person delegation.

The purpose of the visit is to further strengthen interstate as well as economic and trade relations between Hungary and China, and to extend cooperation to further areas, said Bertalan Havasi, the spokesman for the Hungarian prime minister, on Monday.

Xi last visited Hungary in 2009 before assuming a leadership position in the Communist Party of China. His upcoming visit coincides with the 75th anniversary of establishing diplomatic relations between the two countries.