China In Eurasia

Welcome back to the China In Eurasia briefing, an RFE/RL newsletter tracking China’s resurgent influence from Eastern Europe to Central Asia.

Big news! The China In Eurasia newsletter will now be going out twice a month. Expect to see it in your inbox on the first and third Wednesdays of each month. I’m RFE/RL correspondent Reid Standish and here’s what I’m following right now.

China Takes Center Stage In Europe

Debt problems and transparency concerns pushed Beijing’s projects across Europe into the spotlight this month. A controversial Beijing-financed highway project in Montenegro and a $1.5 billion loan to build a Chinese university in Hungary have rung alarm bells in Brussels as both ventures pointed to growing influence within the European Union and on its doorstep.

Finding Perspective: Hungary signed a deal with Shanghai’s prestigious Fudan University in late April that would open a campus in Budapest by 2024.

Leaked documents show that the campus will cost $1.8 billion and that the Hungarian government will take out a $1.5 billion Chinese loan to cover the majority of the cost.

The plans are controversial for a host of reasons, as I reported this week with my colleague Akos Keller-Alant from RFE/RL’s Hungarian Service.

Opposition politicians in Hungary raised concerns over potential debt problems and that Hungarian taxpayers are footing the bill for a private Chinese university, pointing out that the proposed project will cost more than what the government spends annually on higher education across the entire country.

Many details around the project and the Chinese loan are also hidden, which Budapest Mayor Gergely Karacsony told us is one of the reasons why he’s trying to block the campus from being built.

Meanwhile, Montenegro asked the EU in April for help in paying back its $1 billion debt to China for a still-to-be-completed highway to Serbia, which I explored in an article with Asja Hafner, Gjeraqina Tuhina, and Slavica Brajovic from RFE/RL’s Balkan Service.

The EU rebuffed those calls to help pay off the loan, which was signed by the previous government, leaving the cash-strapped Balkan country in a precarious situation as its first debt payments are due this summer.

Why It Matters: Both cases point to rising concern in Brussels (and Washington) over Chinese lending practices and debts, which could open the door to further political and economic influence by Beijing.

But the examples also highlight the role that Chinese cash occupies in domestic politics.

In Hungary, China is a useful card for Prime Minister Viktor Orban to play in his standoff with the EU. His strong relationship with Beijing has also given him cover as the country’s democratic institutions have eroded under his watch.

Read More

• My colleague Predrag Tomovic from RFE/RL’s Balkan Service looked at details of the contract that Montenegro signed with the Export-Import Bank of China, focusing on the clause that could allow the bank to seize assets if the government can’t meet its debt payments.
• For added context on what’s motivating ties between Beijing and Budapest, this quote from my interview with Tamas Matura, an assistant professor at Corvinus University in Budapest, is illuminating: "None of these ideas are coming from China. They are coming from the Hungarian side, but, of course, Beijing is happy to go along with them.”
• RFE/RL’s Hungarian Service spoke with local expert Gyorgy Tilesch about security concerns over Budapest hosting Fudan University, which has known ties to China’s intelligence services.

Expert Corner: Europe Between Beijing And Washington ​

Readers asked: “Is Europe becoming the new dividing line between China and the United States?”

"Europe sees itself as a moderating force in the escalating competition between the United States and China. For economic and political reasons, it is pushing back against the notion of a zero-sum world and refusing to choose sides. Walking this geopolitical tightrope will be increasingly challenging. China may welcome a nonaligned Europe, but U.S. politicians will find it very difficult to swallow." -- Noah Barkin, author of the German Marshall Fund’s Watching China In Europe newsletter and managing editor with Rhodium Group's China practice

Do you have a question about China’s growing footprint in Eurasia? Send it to me at StandishR@rferl.org and I’ll get it answered by leading experts and policymakers.

Three More Stories From Eurasia

1. Playing The Long Game

Beijing is preparing for fallout from U.S. President Joe Biden’s decision to withdraw American troops from Afghanistan, where China is looking to wield more influence but is cautious about getting too involved in the country’s chaos.

Evolving Interests: China shares a 76-kilometer border with Afghanistan and has preferred a low-key approach toward its unstable neighbor, but that’s slowly changing, which I wrote about with my colleague Ajmal Aand from RFE/RL’s Radio Free Afghanistan.

Beijing’s main concern is about Afghanistan becoming a haven for Uyghur radicals and other fundamentalists angered by Beijing’s repressive policies toward ethnic Muslim minorities in Xinjiang to launch a cross-border insurgency.

China has also been lured by Afghanistan’s mineral riches, with Chinese companies announcing investments worth billions of dollars in copper mining and oil exploration, although ongoing instability has left those ventures on hold.

Reality Check: China will look to ramp up its diplomatic efforts and protect its interests, but the country has no desire to fill the vacuum left by the United States in Afghanistan.

2. Xinjiang Continues To Ripple Across Eurasia

The fallout from China’s ongoing internment of Uyghurs, Kazakhs, and other Muslim minorities in its western Xinjiang region continues to reverberate across Central Asia and beyond.

The Local: As RFE/RL’s Kazakh Service reported, three ethnic Kazakhs who claimed asylum in Kazakhstan after crossing the border illegally from Xinjiang are asking the government for permission to leave the country.

Despite receiving temporary asylum, none of the three people are able to work legally in the country and have no path to citizenship or permanent residency under Kazakh law. In the face of these difficulties, they’re pushing the Kazakh government to allow them to leave for a third country.

Meanwhile, Raqyzhan Zeinolla, a 58-year old naturalized Kazakh citizen, was released in April after being imprisoned in China for 17 years. Zeinolla was arrested in 2004 during a visit to Xinjiang and accused of being a spy, where he then did stints in prison and a so-called “reeducation camp.”

The Global: The watchdog group Human Rights Watch declared in April that the Chinese government is committing crimes against humanity against Uyghurs and other groups in Xinjiang.

The Rand Corporation also released a new study where the authors examined satellite photos of Xinjiang to show the massive expansion of detention facilities in the area.

3. Deciphering The Belt And Road

China is the world's largest official creditor, but many of the basic facts around Beijing's foreign lending are still unknown.

In the hopes of pulling the curtain back on these practices, I interviewed Scott Morris, one of the authors of a recent study by the Center for Global Development that did a first-of-its-kind analysis of 100 Chinese contracts across 24 developing countries in Africa, Asia, Europe, and Latin America.

Main Takeaways: The study finds that Chinese contracts have a host of unique features that are unusual even for the murky world of international lending.

A strong reliance on secrecy is common among Chinese contracts, while many deals contain clauses that prevent collective-debt restructuring and allow Beijing to cancel debt or accelerate repayments, which Morris says could potentially influence the policies of debtor countries.

Despite the restrictive nature of the deals, Morris pushes back on so-called “debt-trap diplomacy,” the idea that Beijing is deliberately trying to get countries into debt in order to increase its influence over them.

Instead, he says that after the analysis of the contracts, it’s clear that “Chinese entities are issuing loans with the full intention of getting their money back.”

Across The Supercontinent

It's Chinatown: A Tajik city bulldozed 30 houses on a picturesque riverbank for a huge Chinese-funded project comprising 1,200 apartment units, a school, car park, and various stores.

My colleague Farangis Najibullah looked at how, six years later, 300 evicted people are still waiting for promised housing.

Front Of The Line: RFE/RL’s Ukrainian Service is investigating how Chinese citizens living in Ukraine were vaccinated en masse against COVID-19, while the rest of the country’s rollout continues to move slowly.

Sinopharm Arrives: North Macedonia’s struggling vaccination program got a boost with the arrival of 200,000 doses of China’s Sinopharm vaccine, RFE/RL's Balkan Service reported.

About 500,000 doses of Sinovac, another Chinese vaccine, are supposed to arrive later this month.

Perception Gap: Despite being outspent by the EU, a majority of Serbs believe that China is the largest provider of aid to Serbia to combat the pandemic -- although Iva Martinovic from RFE/RL’s Balkan Service reports that this is changing.

According to a recent study, 56.4 percent of Serbs believe China is the top donor, a drop from 75 percent who thought so in the early stages of the pandemic last year.

One Thing To Watch

How to counter challenges posed by China was an early focus from the May 4 meeting of G7 ministers in London. Western officials say they are not looking to contain China, but rather compete with it.

Ahead of the planned G7 summit next month, expect discussions to pick up around Western alternatives to China’s Belt and Road Initiative. The United States, the European Union, Japan, and India are already discussing forming alternatives to Beijing’s infrastructure project and Biden has reportedly asked for it to be included on the summit’s agenda.

That’s all from me for now. Don’t forget to send me any questions, comments, or tips that you might have.

If you enjoyed this briefing and don't want to miss the next edition, subscribe here. It will be sent to your in-box on the first and third Wednesdays of each month.

BUDAPEST -- A controversial Chinese university project has renewed concerns about Beijing's growing influence in Hungary and pushed Prime Minister Viktor Orban's close ties to China back into the spotlight.

Hungary signed a strategic agreement with Fudan University on April 27 that would open a campus in Budapest by 2024. The deal would make it the first Chinese university in the European Union and the first foreign outpost for the prestigious Shanghai-based school, which the government says will raise higher-education standards in Hungary.

But growing concern about a lack of transparency over the project, as well as revelations that the Hungarian government is planning to take on a huge, opaque Chinese loan to build the campus, has left the venture embroiled in controversy.

"Until the government provides full disclosure of all the details of the project, we have nothing to negotiate about, which means that we will not give our consent to the construction of the Chinese university," Budapest Mayor Gergely Karacsony told RFE/RL.

Karacsony remains one of the most vocal critics of the project, saying the planned campus places an undue financial burden on taxpayers and that the government is refusing to disclose all of its "decisions, contracts concluded or in preparation, and strategic agreements" regarding Fudan's plans in Budapest.

Documents obtained in early April by Direkt36, a Hungarian investigative-journalism outlet, show that pretax construction costs for the Fudan campus are estimated at $1.8 billion, more than the Hungarian government spent on its entire higher-education system in 2019.

The state plans to finance around 20 percent of the project from its central budget, with the rest of the money provided by a $1.5 billion loan from a Chinese bank. According to the documents, the construction will be carried out using mostly Chinese materials and labor, and Fudan University has agreed that the China State Construction Engineering Corporation -- the largest construction company in the world -- will bid for the lucrative contract.

The area where the government wants to build Fudan University was previously picked to host a Student City that would provide accommodation and other facilities for Hungarian students. Karacsony said that the city's plans were being overridden by the Hungarian government and that he and other high-ranking city officials planned to launch a referendum to block construction of the university. The strategic cooperation agreement "is about giving huge buildings to China for [free]. It serves the expansion of Chinese companies in Europe," he said.

The proposed Fudan University campus is the latest manifestation of China's growing footprint in Hungary, which has expanded since Orban returned to power in 2010 and launched an "Eastern Opening" policy meant to cultivate close ties with Beijing and Moscow in order to attract investment and new economic opportunities for Hungary following the global financial crisis.

While Chinese investment into Hungary and Central Europe as a whole has been slow to materialize, Orban has cultivated a strong relationship with Beijing over the years.

Chinese President Xi Jinping spoke with Orban on the phone on April 29, with Xi praising the nationalist leader for his China-friendly policies and deepened cooperation throughout the pandemic before inviting him to visit Beijing.

"Hungary is -- and will remain -- the centerpiece for Chinese engagement in Central Europe and that's only become more true during the pandemic," Paul Stronski, a senior fellow at the Carnegie Endowment for International Peace, told RFE/RL. "For the Chinese, Hungary is the gateway to the rest of Europe."

A New Opening

Finding the right balance between friendly gestures to Beijing and still maintaining the trust of Western allies has been a unique feature of Hungary's foreign policy. But walking that tightrope has become increasingly hard for Budapest during the pandemic.

The Orban government's decision to move forward with the Fudan campus stirred concern in Washington for its NATO ally, with the U.S. Embassy in Budapest expressing reservations over the project. "The possible opening of Fudan University's first campus in Europe is a cause of concern, as Beijing has a proven track record of using its higher-education institutions to gain influence and stifle intellectual freedom," the embassy said in a statement to the Hungarian newspaper Magyar Hang.

Budapest has also found itself at the heart of several incidents with the EU in which the Hungarian government has sought overtures to Beijing.

Following tit-for-tat sanctions in March between China and the EU over Beijing's human rights abuses in its western Xinjiang region, Hungarian Foreign Minister Peter Szijjarto denounced the measures as "pointless, self-aggrandizing, and harmful."

SEE ALSO:

In Coordinated Effort, West Sanctions China For Rights Violations In Xinjiang

A few days later, Chinese Defense Minister Wei Fenghe was in Budapest as part of a planned visit and used the opportunity to condemn EU sanctions and praise Hungary's conciliatory approach, claiming that Beijing "has always regarded Hungary as a good brother."

Budapest also reportedly blocked an EU statement the same month that criticized China's new security law in Hong Kong, preventing the bloc from initially joining the United Kingdom and the United States in their own statements over the erosion of human rights in the former British colony.

Hungary is also the only EU member country that hasn't acknowledged potential security concerns posed by Chinese vendors like Huawei to 5G mobile networks. Budapest is even home to Huawei's largest manufacturing base outside of China and hosts a new regional research and development center for the company.

SEE ALSO:

Balkans Become Unlikely Bridgehead In Europe For U.S.'s Anti-China Push

Opposition politicians in Hungary have also raised concerns about the proposed Fudan University campus, pointing to potential debt problems and a potential lack of academic freedom at the institution.

Katalin Cseh, a member of the European Parliament from Hungary's Momentum Movement, told RFE/RL that she asked EU foreign-policy chief Josep Borrell to prevent the establishment of the Budapest campus due to the wider risks it could pose to the bloc.

"Beijing needs 'Trojan horses' within the EU, and the Hungarian government voluntarily offers Hungary for this role," Cseh said. "It is a high risk when a country puts China's interests above the European community's interests, or above its own country's interests."

Between China And The EU

According to Tamas Matura, an assistant professor at Corvinus University in Budapest and the founder of the Central and Eastern European Center for Asian Studies, these moves should be viewed as political gestures to Beijing rather than substantial policy shifts, with the overtures to China functioning as a bargaining chip in Hungary's ongoing standoff with the EU.

"In the framework of Orban's battle with the EU, he needs a big brother like China," Matura told RFE/RL.

Orban has championed what he calls "illiberal democracy" in Hungary and Budapest was singled out in human rights watchdog Freedom House's annual report, published in April, for an "unparalleled democratic deterioration over the past decade."

Orban's Fidesz party has also been suspended from the EU Parliament's European People's Party and, as Budapest and Brussels remain locked in a tug-of-war set off by EU concerns over the rule of law and misuse of the bloc's funds, observers like Matura say the prime minister is using his relationship with China for domestic purposes.

"None of these ideas are coming from China, they are coming from the Hungarian side, but of course Beijing is happy to go along with them," Matura said.

Hungary took out a 20-year, $1.9 billion loan in 2020 from Beijing to build a railway link that would connect Budapest with the Serbian capital, Belgrade, but the project remains controversial at home and across the region due to delays and a lack of transparency.

In April 2020, the Hungarian parliament voted to give the government extraordinary emergency powers on the premise of combating the pandemic, but it also voted to keep all details around the railway project classified, including a feasibility study about its profitability, arguing that it was required in order to secure a loan from the Export-Import Bank of China.

This has led some critics in the country to question the project's true benefit. Further concerns were raised after a significant contract for the construction work went to a consortium owned by billionaire Lorinc Meszaros, Hungary's richest person and a childhood friend of Orban.

Elsewhere, Orban's close relationship with Beijing has helped solidify his standing at home in at least one area.

While public approval in Hungary for China has declined since the start of the COVID-19 pandemic, Budapest's use of Chinese vaccines has helped give Orban a domestic boost in combating the virus.

Hungary ordered doses of the BioNTech/Pfizer, Moderna, and AstraZeneca vaccines through the EU, but is the only member of the bloc that also approved China's Sinopharm and Russia's Sputnik V vaccine, despite neither shot being approved by the European Medicines Agency.

So far, the move appears to have paid off for the populist Orban, who is looking to increase support ahead of parliamentary elections in 2022. Hungary has fully vaccinated 21.5 percent of its population as of May 2 -- nearly double the EU average -- and has begun to ease coronavirus restrictions.

SEE ALSO:

Hungary Eases COVID-19 Restrictions For Those Who Are Vaccinated

"There might be a sense of satisfaction right now in the Hungarian government," Matura said. "A satisfaction that ties with Beijing paid off when they needed help fighting the pandemic, which were also helpful ahead of the general elections next year."

The Home Front

Analysts say the Orban government's embrace of Beijing is difficult to separate from the shifts taking place within Hungary's domestic politics.

The strategic agreement with Fudan University also coincided with recent changes to the management of Hungarian universities, which not only transfers billions in state assets to those close to the prime minister, but also could enable Orban and his supporters to exert long-term control over public education in the country.

The Fudan announcement also comes shortly after the Central European University -- founded by billionaire George Soros and considered one of Hungary's premier postgraduate institutions -- was effectively forced out of the country in 2018 after amendments were passed to a higher education law that were widely seen as targeting the university.

The European Court of Justice said in October 2020 that the move against the university violated Hungary's commitments under the World Trade Organization and infringed upon the provisions of the EU Charter of Fundamental Rights relating to academic freedom. Despite that ruling, the Central European University remains based in Vienna.

All this leaves Hungary at a crucial junction as it gears up for next year's elections, Stronski says.

The shifts in the country's domestic and foreign policies over the last decade have largely been led by Orban and should he and his Fidesz party lose in 2022, many of those changes could see a swift reversal.

"Having Orban in place for the last decade has allowed the Chinese to invest in him and also in the Hungarian elite," Stronski said. "If the government changes hands there's no certainty that this China policy would stay in place. There isn't much support in Hungary for these pro-China policies beyond Orban's current government."