Budapest Takes Hushy €1 Billion Loan from 3 Chinese Banks

Hungary borrowed €1 billion ($1 billion) from three Chinese banks to reportedly finance investments in infrastructure and the energy sector

Budapest did not publicly announce the loan, but the information was available from its debt agency website. Budapest confirmed the information after it was made public by Hungarian news outlet Portfolio. 

“The loan agreement allows for the financing of investments in infrastructure and the energy sector, among others. The transaction keeps the public debt-to-GDP ratio within the ceiling at 28.9 percent,” the government agency told Portfolio.

The loan reportedly came from the China Development Bank, the Export-Import Bank of China and the Hungarian branch of the Bank of China, which was withdrawn on April 19 and is subject to be repaid in three years.

The credit goal was listed as “Financing of central budget expenditures in the areas of high technology, infrastructure construction, transport infrastructure, and energy,” which corresponded to the official statement, though it made no further reference to the specific projects involved.

The interest rate was stated as “variable” with no further details.

Portfolio also pointed out that the latest Chinese loan was the “highest amount within the existing stock (which was not issued in the framework of a bond issue),” with the second largest loan also of Chinese origin, a loan worth approximately $917 million taken out for the Budapest-Belgrade railway line.

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It’s possible that Budapest turned to Beijing for loans as billions of funding from Brussels went nowhere due to frictions with the EU over human rights issues.

As the EU began to perceive Beijing as a “competitor” instead of a partner in the global economic playing field, as seen in European Commission President Ursula von der Leyen’s re-election manifesto, Hungary remained one of the few, if not the only, EU member states to deepen its ties with Beijing, both politically and economically.

Economically, investments from Chinese firms have been pouring into Hungary, with Chinese electric vehicle (EV) maker BYD planning to open a factory in the country as the EU bumped the tariffs for Chinese EVs to protect the bloc’s automobile industry.

BYD’s factory in Hungary, once completed, would shield it from the new tariffs imposed on Chinese EV imports.

Politically, Hungary has been positioning itself as a bridge between the EU and Beijing, the latter two having been increasingly at odds over trade issues and Russia’s war in Ukraine.

In early July, Hungarian Prime Minister Viktor Orban, after Budapest assumed the rotating EU presidency, made an unsanctioned visit to Beijing in what he called a “peace mission” to settle the war in Ukraine after his visits to Ukraine and Russia.

In May, Orban hosted Chinese President Xi Jinping in Budapest in what Xi called a “new journey of the new era” of the Sino-Hungarian relationship.

In October 2023, during his visit to China’s Belt and Road Forum, Orban said Hungary would be China’s “trusted friend and partner” in the EU. He also discussed with Xi the construction of the Budapest-Belgrade railway line, which is part of China’s Belt and Road projects in Europe.