SIM Report: University opposition unlikely to mark major shift in Hungary-China relations

SIM REport: Central & eastern Europe, issue 7

Gergely Karácsony, the mayor of Budapest, has rejected plans for the construction of a campus of the Shanghai-based Fudan University in the capital after discussions with innovation and technology minister László Palkovics on 17 May. The project has reignited concerns about China’s growing clout in Hungary.

A strategic agreement was signed between Fudan University and the Hungarian government on 27 April that would see the construction of the new campus in Budapest by 2024. Supporters say the project will help improve education standards in Hungary. Lack of transparency relating to the project and reports that Hungary was planning to receive a significant loan from China under opaque circumstances for the project accentuated public division over the campus. On 27 May, Karácsony said Budapest’s metropolitan and ninth district councils will continue opposing the university project as parliament debated the establishment of the new campus in the city. According to documents seen by Direkt36, an investigative news website, the state would finance 20 per cent of the project – at a total estimated cost of USD1.8 billion – while the remaining funds will be given as a loan from a Chinese bank. Moreover, construction for the project was to be provided by a Chinese firm, using materials and labour mostly from China. Critics argue that the new campus would place an undue financial burden on Hungarian taxpayers since part of it would be financed by the state.

While the government maintains generally strong relations with China, local authorities have voiced concerns over large-scale Chinese investments such as the proposed Fudan campus. For the mayor of Budapest, involvement of Chinese investors also put into question the construction of Student City, a planned accommodation project for students, at the same site. Karácsony said that the Student City would be downgraded and built on a fraction of the initially planned space because of the Fudan project. Opposition politicians in Hungary have also raised concerns about the proposed Fudan University campus, pointing to a potential lack of academic freedom at the Chinese institution.

Plans to build the Chinese university campus would have been a highly visible example of China’s growing economic interests in Hungary. In a demonstration of the close ties between the two countries, Budapest blocked an EU statement in early May that accused China of weakening democracy in Hong Kong. Prime Minister Viktor Orbán and Chinese President Xi Jinping also enjoy a close personal relationship. Another example of Hungary’s positioning vis-à-vis China relates to the use of the Chinese Sinopharm vaccine as part of the country’s national vaccination strategy. Hungary has outpaced many fellow EU countries in vaccination rates due to a reliance on both the Sinopharm and Russia’s Sputnik V vaccines. Neither vaccines have received approval from the European Medicines Agency. The successful vaccination campaign has bolstered Orban’s popularity.

In many ways, China views Hungary as a strategic gateway into Europe and this is reflected through a series of significant Chinese investments in the country. In 2020, Hungary received a USD1.9 billion loan from Beijing to construct a railway link connecting Budapest with Belgrade; however, the project has generated controversy due to delays and a lack of transparency. Washington sees projects of this nature as strong evidence of China’s desire to expand its influence over its NATO ally through infrastructure investments and, more recently, through initiatives like the Fudan University project. The US Embassy in Budapest expressed concern over the project because ‘Beijing has a proven track record of using its higher-education institutions to gain influence and stifle intellectual freedom’.

While the development might represent a setback for Hungary-China relations, it is unlikely to signal a shift in the existing openness to Chinese investments in Hungary. For example, unlike a growing number of European countries, Hungary does not appear to share concerns that Chinese technology firm Huawei may pose a security risk if it is allowed an important role in 5G development. Indeed, Huawei’s manufacturing base in Budapest is the largest such facility outside of China. However, the result of parliamentary elections planned for next year could mark a decisive shift in Hungary’s policy of positioning itself as a bridge to Europe for China. As many foreign policy initiatives are personally spearheaded by Orban and his close allies, a change in government may see a new administration elected that is less amenable to China and more willing to pursue closer alignment with the EU. In the meantime, however, local-level suspicion of China will likely present a political obstacle to new Chinese investment projects backed by the government.    

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