In recent years, partially state-owned Chinese banks established a presence in the Visegrád countries, mainly to aid Belt and Road projects, which started facing obstacles in recent years.
In early 2020, the Hungarian National Bank has announced the registration of a new credit institution in the country, the local subsidiary of the China Construction Bank, which immediately agreed to partake in the central bank’s Renminbi Initiative, the introduction of dual RMB (the Chinese currency) and HUF bank accounts. Like others in China’s ‘big four’ banks, most of the Construction Bank’s shares are controlled by the Chinese government holding, the Central Huijin Investment Company.
This is not the first instance that Hungarian financial authorities cooperate with a Chinese state-owned bank. In November of 2019, Hungary signed a strategic cooperation agreement with the Industrial and Commercial Bank of China (ICBC). In the official statement announcing the agreement, they stated that the ICBC plans to strengthen the Belt and Road Initiative (BRI), the Chinese government’s geostrategic effort to dominate Eurasian trade through infrastructure development. The two parties stated the initiative may further be aided by the opening of a regional ICBC office in Hungary, as well as financing projects like the Chinese-built Budapest-Belgrade railroad.
Growing interest
In recent years, leading Chinese banks (which are, based on market capitalization some of the largest companies in the world) have strengthened their presence in the broader Central-Eastern European region. CEE countries first became attractive to Chinese investors after their ascension into the EU. By 2012, China established the ‘17+1’ cooperation, involving 11 regional European union member states and five Western Balkan countries, to further economic cooperation. This cooperation has often been described as a hollow shell, or more charitably, as a collection of bilateral relations with no organizational framework or central strategy.
Nevertheless, this framework did yield results in some states, namely, the four Visegrád countries who, together with Romania, comprise 80% of overall trade volume among the 17+1 countries. China is increasingly interested in the region, which is seen as of strategic importance for the Eurasian trade routes to be established within the BRI. This is best shown by the fact that the latest 17+1 summit held on February 2021 was the first such meeting headed by President Xi Jinping instead of Premier Li Keqiang.
The Balkans Silk Road
In recent years, the Czech Republic and Hungary became the main targets of Chinese investment. According to CzechInvest, China became one of the top five foreign investors in the Czech Republic, reaching EUR 568 million in capital. China’s position was strengthened further with Xi Jinping’s 2016 visit to Prague, where the two countries signed a strategic partnership, which included a EUR 7.39 billion investment package until 2020.
The importance of Hungary in the Chinese regional strategy grew significantly after the purchase of the Greek port of Pireus by China COSCO Shipping. Since then, China’s goal was to establish a land transportation route between Pireus and Western Europe, most importantly, a railway crossing the Balkans, of which Hungary would be the entrance point to the EU and the Schengen Zone.
Hungary, Czechia, as well as Poland, now host branches of two large Huijin-owned banks, the Bank of China and the Industrial and Commercial Bank of China. While the BOC offers limited personal banking services, the main purpose of both companies in the region is bond IPOs and investment financing.
Controversial financing
While initially, financing of BRI infrastructure was done directly through government-owned funds, this role was gradually taken over by Chinese commercial banks. On one hand, banks like the BOC and the ICBC offer domestic lending to the major Chinese corporations that partake in infrastructure construction abroad. On the other hand, their local branches offer direct funding to ongoing BRI projects in the target country (often through issuing Silk Road bonds locally).
As a result, the typical BRI project’s completion is largely removed from the local market, as financing and realization are mostly done by Chinese entities. A good example of this is the modernization of the Budapest-Belgrade railway, the flagship project of BRI in Hungary and Serbia. The tracks are mostly constructed by Chinese companies, and the Serbian and Hungarian parties are taking out from Chinese financial institutions loans to cover the cost. That way, all the major aspects of the project are controlled by Chinese actors.
A common criticism of the BRI in the region was that, apart from the creation of infrastructure necessary for moving Chinese products, it failed to invest in beneficial infrastructure (such as promised but eventually halted investment into nuclear and hydropower in Romania and Czechia), or job creation. Despite the strategic agreements, few Chinese companies tap into local labor and consumer markets. For example, the latest major investment in Hungary was Wanhua’s 2011 acquisition of Borsodchem. Instead, BRI’s main interest remains access to Western markets.
Additionally, some West Balkans countries are wary of establishing too strong ties with China, lest they risk their NATO and EU integration. Security concerns already prompted some CEE nations to sever ties with Chinese companies in energy and IT investments. Such hurdles already pushed the completion of BRI projects, including the Budapest-Belgrade railway further in the future. Although Huijin banks continue to provide a stable financial background, the creation of BRI’s Balkans road and CEE trade network may be delayed even further.


Leave a Reply Cancel reply
Ad
Top 5 Articles
Chimborazo February 14, 2025
A Photographer's Passion for Polar Frontiers February 12, 2025
Hungary, a World Leader in Solar Energy April 8, 2025
For the Export Success of Hungarian Enterprises June 17, 2025
MEPs call for EU court action after Hungary passes… April 18, 2025
No comment yet. Be the first!