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49POLITICAL SCIENCES
SINO - HUNGARIAN COOPERATIONS WITHIN OEP AND BRI
Smotrytska M.
PhD, School of Politics and International relations, Central China Normal University, Wuhan, China
Abstract:
In 2016 Sino - Hungarian ties entered the top ten trading partners. Within the framework of cooperation, many points of contact were formed, but the main that became the beginning of the intensification of relations was the combination of the Hungary's Opening the East policy (OEP) and the Chinese Belt and Road initiative (BRI). Keywords : China; Hungary; Opening of the East; OEP; BRI; cooperation; CEE.
Today the EU countries are attracted by a powerful magnetic field to the growing every day Eurasian economic giant - China. During the EU tour with representatives of Germany, France, Belgium and the Netherlands in April 2014, Chinese President XI Jinping called on EU countries to cooperate in developing a project linking the Eurasian part of the Silk road with EU countries Also in December 2014 Li Keqiang attended a meeting of the leaders of China and CEE countries in Serbia, where he stressed that Europe should play a role in the creation of the BRI, while China can play a role in completing the creation of the BRI across the whole Europe [32].
A special place is occupied by Hungary, which has no direct transport connection with China, but is China's first and still most active partner in CEE. It accounts for more than 30% of Chinese FDI in the region. It is an observer in ABII and for the time being she is the only CEE country formally joining the "Belt and Road initiative". Hungary also gravitates to the Central Road within the framework of the BRI and to the South European road within the framework of the Maritime Silk Road.
The foreign policy doctrine "Opening the East" of Hungarian Prime Minister Viktor Orban proclaimed 2010 opened a new stage in relations with Eastern partners and became a smooth continuation of Hungary's activities in the Eastern partnership policy and European Neighbourhood Policy [26]. Viktor Orban said in his speech on February 5, 2010: "the importance of Asia and its weight in the political arena is growing. A few weeks ago, China became the world's largest exporter. The main direction of globalization has changed its vector, and today the East is the world's beneficiary. Hungary also needs to realize that it, as an EU member, though sailing under the flag of the West, but easterly winds blew them" [4]. In the framework of the new foreign policy doctrine of the Hungarian diplomacy has focused on deepening relations with the Russian Federation, people's Republic of China (hereinafter China), the countries of South - East Asia and the Arab world. Hungary's EU presidency has contributed to the development of Hungarian - Russian relations. However, such foreign policy aspirations of Hungary were hindered by American and European diplomacy [15]. However, the growing political weight of the PRC and some countries of the Arab world has pushed Hungary to intensify its foreign policy activities in the Eastern direction [4].
Positive changes in the Hungarian economy were noticeable during the first two years of the OEP. In an interview with Magyar Nemzet in 2012, the Hungarian state Secretary responsible for agriculture stated that Hungary's agricultural balance increased by 60% in 2009 - 2011 (an increase of 2.7 billion euros). Exports of Hungarian agricultural products increased by 45%, including from the Russian Federation by 30%. In 2011 Hungary exported agricultural products worth more than 6.5 billion euros to China, which is twice the same figure for 2009. The growth of Hungarian exports to Asia for three years (2009 - 2011) was: to Kazakhstan - 32%, to India - 600%, to Saudi Arabia - 37%, to the United Arab Emirates - 74% [23].
Today for Hungary, the Chinese vector in foreign policy is of strategic importance. The Hungarian Ministry of Economic Affairs pays great attention to the deepening of the Hungarian - Chinese trade and economic relations.
On August 8, 2014, P. Siyarto at the "summit of cooperation between China and CEE countries at the regional level" noted that cooperation between China and CEE countries meets the interests of the entire EU [15]. CEE countries 'cooperation with countries that are developing rapidly and have achieved significant economic growth will stimulate the growth of the CEE countries' economies. This will help to even out the gap between the countries of Western and Central-Eastern Europe, which in turn will strengthen the EU economy as a whole.
December 18, 2014 P.Siyarto at the opening of the regional branch of "Bank of China" in Budapest, confirmed that Hungary supports the impulses of the PRC to spread its influence on the European market. One of the main goals of Hungarian diplomacy during this period was to achieve the status of the main trade and economic center of Chinese business in the CEE region. One of the significant achievements in this area is that Huawei has been selling all European exports through Hungary since 2015 [24].
The Hungarian government is convinced that a country that strives to be strong cannot ignore relations with the PRC. The significant influence of the PRC is evidenced by the fact that in 2014, China exported a record amount of products worth 2.2 billion US dollars, and in 2015, the share of Chinese investments in Hungary amounted to 3.5 billion US dollars ( the total number of foreign investments in Hungary in 2014 was 4.03 billion euros ).
On September 3, 2015, after viewing the victory day parade of the people's Republic of China, P. Siyarto stated: "This year we will celebrate the 40th anniversary of the establishment of diplomatic relations between China and Europe. However, the development of our strategic partnership is still very slow" [30]. Europe has fallen behind in the race in world politics and economy. Through a number of internal problems such as the migrant crisis, the temporary suspension of the Schengen agreement, the war in Eastern Ukraine, economic sanctions against the Russian Federation, the issue of Britain's withdrawal from the EU, etc. However, during this period, the United States is trying to implement the project of the Pacific Union, and every year there is an increase in the Chinese presence in Latin America and Africa. Europe's inaction in extending its influence to other regions of the world may lead to the loss of the EU's position in the international arena.
Hungary has made significant progress on this issue. At the level of cooperation with Chinese provinces, two meetings were held during 2014. On June 11, 2014, the state Secretary responsible for Hungarian-Chinese relations P. Siyarto received in Hungary the Deputy Governor of the Chinese province Guangxi Zhang Xiaoqin. During the meeting, they discussed the possibilities of economic cooperation in the future. During the meeting, more than a hundred representatives from the province of Guangxi arrived in Hungary to conclude cooperation contracts [20]. This meeting is of strategic importance, because Hungary occupies a favorable location in the Chinese geo-economic concept of "One Belt - One Road" (BRI). The land part of the main sea corridors to Western Europe passes through Hungary, and a significant part of the goods that are exported through the sea corridors starts from the province of Guangxi.
On September 1, 2014, the Governor of Hebei province paid an official visit to Budapest. The delegation, which included potential Chinese investors, took part in a seminar of the National investment Agency and Bank of China, during which the Chinese side was presented investment opportunities in Hungary [11]. Such seminars are an important element of the OEP, as they help to increase investment by Eastern partners, including Chinese ones. In the era of China's economic expansion of Europe, Chinese investment is turning Hungary into an economic foothold in the EU from which China can spread its economic influence.
The effectiveness of such diplomacy is evidenced by the beginning of two Chinese projects in September 2014. On September 1, 2014, the companies "Trust Hungary" (Hungary) "Huai Lai Amethyst Manner co." (China) signed a contract to create a joint venture for the production of wooden barrels. The Chinese company invested 300 million yuan (45.7 million US dollars) [9]. This allowed us to reach a trade turnover of 10 million us dollars per year in 2015.
On September 2, 2014, the pharmaceutical group "Rizhao Jin He Biochemai Group" (hereinafter: RJHB - author) signed an agreement to build a citric acid production plant. At the press conference, Chinese Ambassador to Hungary Hsziao Csien spoke and noted that the
Hungarian - Chinese relations had significantly deepened in 2014. H. Csien stressed that Chinese companies provided 5,000 jobs [18]. Rjhb pharmacological group is one of the leading groups in the chemical industry of China, which production facilities occupy a leading position. The fact that RJHB has decided to establish a European production base in Hungary is an indication of the extremely good investment climate and the group's confidence in the Hungarian economy. RJHB annually produces 1.85 million tons of citric acid in the whole world, the planned production volume of the Hungarian plant is 100 thousand tons. This means that 5% of the amount of citric acid in the world is produced in Hungary (the main buyers of citric acid are such TNCs as: "Coca Cola","Pepsi", "DANONE","Kraft Foods") [18].
On December 17, 2014 Hungary, Serbia, Macedonia and China have signed an agreement to upgrade the line for high-speed trains on the Belgrade - Budapest route ( with 374 km in need of upgrading 334 km ). Hungarian Prime Minister Viktor Orban stressed that: "This railway line will finally allow proper use of the advantages of Hungary's location" [16]. The railway is of strategic importance in logistics on the continent. The new high-speed line will not only be an integral part of the BRI, but will also increase the turnover and passenger traffic in the region.
In April 2015 Hungary joined the "Asian Infrastructure Investment Bank" (hereinafter: AIIB) [12]. Joining the AIIB contributes to the development of Hungary's international relations in the field of Finance and trade, and strengthens Hungarian companies in the Chinese market. This project not only provides an opportunity to participate in the decision - making process of AIIB and its investment programs, but also contributes to improving the export potential of Hungary. Membership in the AIIB makes it possible to use the Bank capital of the AIIB for the modernization of companies that participate in the BRI, which strengthens the Opening the East policy and the economic security of Hungary.
As a result of deepening cooperation in the financial sphere and gaining access to AIIB capital, on April 15 - 18, Deputy Minister of water resources of the people's Republic of China Chao Yung arrived in Hungary on an official visit. During the meeting, representatives of the countries agreed to develop a draft agreement on cooperation in the field of water management [10]. The construction of protective dams, drainage systems and water level regulation is a strategic issue in Central -Eastern and South - Eastern Hungary. Hungary's cooperation with China in the field of water management is beneficial for Hungary through the exchange of technology access to Chinese investments and loans, which will reduce flood damage and preserve the environment and freshwater resources from pollution, which is very important due to the trend of decreasing freshwater reserves in the world.
Following the agreements on the development of a plan for a water cooperation agreement between Beijing and Budapest, another agreement of strategic importance was signed on cooperation in the nuclear sphere. "Agreement on nuclear education, knowledge
enhancement and cooperation in the field of nuclear research" was signed on may 26, 2015 [17]. The agreement provided an opportunity to exchange information between scientists of the two countries in the nuclear field and to train highly qualified specialists, as well as to jointly design and build nuclear power plants. The PRC is also an important partner of Hungary in the field of providing and processing nuclear fuel. Further deepening of relations with China in the field of nuclear technology will allow Hungary to increase its energy security through the modernization and construction of new nuclear power plants.
The greatest success not only in the framework of Hungarian - Chinese relations, but also in the OEP was the accession of Hungary to the Chinese geo-economic BRI. On June 6, 2015 [27] thus, Hungary became the first EU country to join the BRI and two corridors of the Silk road Economic corridors and the main land parts of the main sea corridors to Western Europe pass through it.
At a press conference, P. Siyarto stressed that: "the Facts indicate that the Hungarian - Chinese relations have never reached such a level as now". In 2014, export growth was 8% and reached 2.2 billion us dollars. in the first quarter of 2015, the figures increased 7 times compared to the previous year. Chinese investment has reached 3.5 billion us dollars, and many Chinese companies have opened their regional offices in Hungary. The Chinese geo - economic BRI is of great interest to Hungary. First, the Hungarian policy of "Opening the East" and the Chinese BRI in the CEE region can complement and strengthen each other, since this is the policy of two countries that are interested in integrating trade, economic and financial relations between each other. Second, of the three land-based parts of the sea corridors linking Western and Central - Eastern Europe with the PRC and other BRI countries, two pass through Hungary along with the proposed Chinese transcontinental corridor. In addition, after the failure of the train, which was sent from Ukraine and arrived with a significant delay. The effectiveness and feasibility of such a corridor may be questioned. If the problems with the experimental train cannot be resolved, then a possible scenario is to close part of the Odessa -Warsaw corridor and include the Budapest - Chop and Budapest - Warsaw routes in the BRI maps, which will make it possible to resolve the issue without significant losses.
Hungarian diplomacy actively cooperates with China not only in the economic sphere but also in the cultural sphere. At the conference of Ministers of culture of China and CEE countries on October 12 - 14, 2015, Hungary and China signed a plan for cooperation in the field of culture for three years [14]. The purpose of the document is to deepen cultural cooperation between the countries and coordinate bilateral cultural events between the ministries. Cooperation in the field of culture is an important complementary element in trade and economic cooperation, especially in the cooperation of small and medium-sized businesses. After all, it is through an insufficient number of specialists, not knowing the culture of the country that the signing
Magyar Tudomanyos Journal # 42, 2020 of many contracts can be disrupted, and the development of small and medium-sized businesses is key to stimulating the growth of social welfare.
May 21, 2016 Peter Siarto after the Hungarian-Chinese economic conference in Budapest, said: "Hungary will continue to be the flagship of China's cooperation with the CEE countries, and wants to remain so in the future". China is one of the top 10 trading partners of Hungary. in 2015, exports to China exceeded 500 million Hungarian forints (1.8 billion US dollars). Chinese economy Minister Chun Shang stressed that both sides can be proud of the fact that in 2015, Chinese investment in Hungary reached 3 billion US dollars, which is the largest amount in the CEE [7].
Thus, the Hungarian-Chinese relations for 67 years of establishing diplomatic ties between the two countries are at the highest level. Since the beginning of the OEP, the Hungarian - Chinese trade and economic turnover has grown significantly, reaching a record amount of 2.2 billion US dollars in 2014. Chinese investment in 2014 amounted to 87.5% ($ 3.5 billion US dollars) of the total investment.
However, it should be noted that, despite significant successes, in 2015, the Hungarian policy of OEP was criticized by opposition forces due to a decline in exports to Eastern countries by 1.6 billion US dollars. However, according to P. Siyarto, OEP on the contrary survived this test, explaining that such a decline was caused by unforeseen factors. Because of the embargo with Russia export from Russia decreased by 15 % (510 million dollars), Ukraine's economy fell by 10% the exports decreased by 12% (310 million U.S.), in addition the plant of Nokia in the city Komaron was closed which reduced exports by another US $ 820 million. "Thus the company's global decision, the war in a neighboring country plus EU sanctions through this, took away 1.6 billion US dollars from exports as part of the OEP, but in the end we reduced by 1 billion US dollars. US" - said P. Siyarto [8].
The effectiveness of the OEP was evidenced by the proclamation of the "opening of the South" policy, March 5, 2015. Peter Siyarto. The Hungarian foreign Minister noted that the policy of OEP "opened the door to economic players, so it was decided that the new economically oriented foreign policy should extend its economic influence in the South [13]".
Another evidence of the effectiveness of the OEP policy is the growth of political Hungary in the EU. On January 26, 2016 state Secretary of the Hungarian Ministry of Health Laszlo Szabo said: "The political weight of Hungary in the EU has grown, in economic diplomacy and foreign policy, the state has much more weight than before". He also stressed that despite the official hostility of major EU States due to Hungary's actions to solve the migrant crisis in Hungary (we are talking about the construction of border structures on part of the southern border of Hungary, in order to stop migration through the territory of Hungary - the author), from the owners of German and European companies and TNCs, Hungary receives positive feedback (because business circles consider Hungary's actions to be correct, because it protected its economic stability and national interests).
Thus, due to the policy of OEP, Hungary has become a stable economic and political factor in Europe. This is evidenced by a record growth in exports of 8 billion Euro [19].
During the sixth meeting of the Prime Ministers in the 16+1 format in Budapest, in November 2017, Hungarian foreign Minister Peter Szijjarto spoke about plans to make Hungary the largest exporter in the Central European region to China, and China - the largest investor in Hungary. Certain steps are being taken in this direction, for example, in the first eight months of 2017, the bilateral trade turnover increased by 26%, and the volume of Chinese investment in the Hungarian economy amounted to 4.1 billion US dollars. At the end of 2020 it is expected that the reconstruction of the railway from Budapest to Belgrade will begin. 85% of the cost of this work will be financed by a Chinese loan, which will be provided in us dollars for 20 years at 2.5% per annum [31]. The project is the first European project involving an EU member, Hungary, a non-EU member Serbia, and China. It will create a major modern freight route to Western Europe through Central Europe.
Hungary's active participation in the BRI has been welcomed by investors such as China's leading electric automaker BYD, which opened its first fully-owned bus plant in Europe in the northern Hungarian city of Komarom in April this year. At the same time, well-known Hungarian companies such as the world-leading Building Information Modeling (BIM) software developer Graphisoft have chosen Hong Kong as their partner to grow their businesses along the Belt and Road [6].
When analyzing BRI logistics routes in Hungary, it should be emphasized that at least one of the economic corridors involving Europe - the Central Asia -West Asia Economic Corridor - but in the long term (when the situation in Ukraine improves) even two economic corridors may include Hungary, owing to its central position filled in the southern part of the region. The Central Asia - West Asia Economic Corridor can be expected to be built only in the long term, but through a half continental, half maritime connection, it may reach Hungary earlier. From the port of Piraeus, the majority stake of which is owned by China, the goods can arrive in Hungary via Macedonia and Serbia by rail, and then can go to the most important economic centres of Europe across Hungary [22, p.5]. Upgrading the Belgrade - Budapest railway line is a key element of this segment, on which a decision was made in the summit of the "16+1 Cooperation" in Bucharest, at the suggestion of the Chinese party. The distance of nearly 350 km is currently covered by trains in 8 hours. After the modernization - thanks to the electrified, doubletrack line suitable for a top speed of 160 km/h - the journey time is expected to drop to 2 hours and 40 minutes. 159.4 km of the line to be refurbished are in Hungary (line 150). The entire cost of refurbishment amounts to about US$3 billion, 85%of the investment would be funded from a Chinese interstate loan. The Hungarian segment is anticipated to cost HUF 472 billion, for which the Chinese Export - Import Bank would provide a loan. Under the agreement, the main
contractor would operate as a non-profit joint venture: Hungarian State Railways would have a stake of 15%, while China Railway International Corporation would have a stake of 85% [28].
The Hungarian section is especially important for the Chinese party because it would be the first time that Chinese companies build a railway track in an EU Member State, which later could be used as a reference in the case of other European infrastructural developments. Thus, it is rather obvious that the Belgrade - Budapest railway is important to China. However, the modernization of the railway segment has significant advantages [29]. First and foremost, the two capitals could be reached more easily after the modernization of the segment. In addition, sooner or later its refurbishment will be inevitable, although the line is not included in the European core railway network. The hopes that Hungary may become a European - level logistics centre would most probably reinforce its central role in the region. The developed railway link will increase Hungary's ability to attract capital, which, combined with cheap workforce, may attract Chinese assembly plants into Hungary [21]. There might be a fair chance of that in the future if Chinese wages continue to increase and transport costs can be reduced. Furthermore, with the help of the railway link, not only Chinese goods could arrive in Hungary but it would provide more opportunities to export domestic products. One should not consider the Chinese market only; by BRI other regions (e.g. the Middle East, the Caucasus, Central Asia, etc.) can be reached more easily. In terms of economy, participation in BRI may open new prospects for Hungary, decrease its unilateral dependency and increase its role as a bridge [3].
In April 2019 Chinese President Xi Jinping,during his meeting with Hungarian Prime Minister Viktor Orban, expressed hope to bring the bilateral ties between China and Hungary to a new level. He stressed that both sides should maintain high-level exchanges, improve mutual respect and trust, reinforce pragmatic cooperation and expand the cultural and people - to -people exchanges. He also called for the solid implementation of projects under the Belt and Road framework, including the Budapest - Belgrade railway [5].
In may 2019 Hungarian Foreign Minister Peter Szijjarto and Innovation and Technology Minister Laszlo Palkovics signed bilateral agreements with Chinese officials, agreed to implement a five-point development plan to further advance Hungarian - Chinese relations. The parties agreed to set up a Hungarian -Chinese university based on the Chinese Academy of Social Sciences and Hungary's National University of Public Service. The two ministers agreed to start preparations for the construction of a Budapest-Bucharest rapid railway via Cluj - Napoca. The project, similar to the Budapest - Belgrade reconstruction will be financed by China.The two countries would cooperate in construction and water management projects. The fifth point involves boosting tourism by launching new direct flights between the two countries.
Also it was agreed to strengthen logistics between countries and cooperation in transport issue. Thus, China Eastern Airlines subsidiary Shanghai Airlines
will operate three flights a week to the Hungarian capital from June 2019 and talks are underway about linking further cities, Szijjarto said, adding that it is important that the BRI should extend to air transport. Due to the upcoming construction of a Budapest - Belgrade railway link and the air freight transport capacity recently launched, Chinese logistics firms are now planning to set up a logistics and warehouse hub near the airport in Budapest [2].
Budapest Liszt Ferenc International Airport also signed a cooperation agreement with two Chinese airports, Zhengzhou and Xi'an, on cargo flights. It paves the way for Budapest to become the gateway to Hungarian exports to China and the number one hub in Central and Eastern Europe for Chinese goods. Thus, China National Machinery Import and Export Corporation (CMC) could invest up to €1bn in Hungary and set up a regional base in the country under an agreement signed by chairman Ruan Guang and Innovation and Technology Minister Laszlo Palkovics in Beijing [25].
It should be noted that due to its geographical location, Hungary can become a link in the chain that is almost impossible to circumvent in the trade route between China and Europe. Beijing is open to new proposals, and plans for the Silk Road are still being formed, and Hungary, taking part in the AIIB and the BRI, may in the near future open up a new Asian market, while strengthening its geopolitical and economic position.
Thus, Hungary has been playing a leading role in the 16+1, organized the first China - CEE meeting in 2011 and one of the annual prime ministers' summit later in 2017, and may become an important link in the BRI. Budapest recently elevated its political relations with Beijing to the level of a comprehensive strategic partnership, and Hungary hosts the biggest stock of Chinese investment in the region. Meanwhile Warsaw and Prague are the two biggest trade partners of Beijing among the four [1, p.133]. Due to their geographic location, these countries are an inherent part of any potential land-based transportation corridor between the EU and China.
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