Hungary Won't Be Pulled Into China Loan-Diplomacy Trap

China patiently continues to expand its influence in the Intermarium, the lands between the Baltic, Black, and Adriatic seas, but it also has seen some setbacks.

Over the last decades the Chinese cobbled together a regional cooperative arrangement, the so-called 17 plus 1 group. Most Intermarium nations are in.

Beijing prefers to deal with them as a block through summitry and woos them with promises of economic largesse for the region. The effort has stalled so far because of anti-Chinese push-back.

Three nations have so far left the organization in objection to Beijing’s policies at home and abroad.

Lithuania was first to ditch the group in 2021. Vilnius has also gone the furthest in cutting itself off from China, vociferously criticizing Chinese human rights violations.

In September this year the Lithuanians have opened a trade representative office in Taipei, while Taiwan set one up in Vilnius even earlier. Beijing promptly punished the Baltic state by banning Lithuanian exports to China.

The Chinese halted and sent back even the wares that had been paid for. On its part, Vilnius prompted the European Union to discipline China via the World Trade Organization for “discriminatory trade practices.”

Further, China retaliated by recalling its ambassador home. Lithuania responded in kind.

This year Estonia and Latvia withdrew from 17 plus 1, citing China’s close relationship with Russia. In particular they object to the lack of a Chinese condemnation of the Russian invasion of Ukraine.

Yet, both Baltic states have not completely broken off their relations with the Middle Kingdom. Instead, they want to trade with Beijing via the European Union. It is unclear if bilateral relations are still on the table: perhaps not for now.

Such developments must have led to a realization that the region is not Africa, so China actually has to exercise some finesse there. Arguably, it could bully only the neediest and the weakest there, but Beijing has lately eschewed its usual ham-fisted tactics.

Nonetheless, the Chinese would love to pull the Intermarium nations into their loan diplomacy trap. China offers loans for infrastructure and other projects; the putative beneficiaries, or junior partners, cannot repay them; Beijing moves in to collect on the unpaid debt and ends up controlling the creditor.

One can assume this must be apparently China’s hope behind its investments in Serbia, Albania, or Bulgaria, arguably the least viable business partners in the Intermarium. Arguably, however, Ukraine is the most vulnerable target of the Chinese.

Bejing has been treating Kiyv quite instrumentally, taking care of its interests first and foremost to the detriment of the Ukrainians. Since China is the largest land owner in Ukraine, it was the Red Dragon Throne’s influence that most likely swayed the Kremlin to allow the shipping of grain to resume through the Russian blockade of the Black Sea.

Ukrainian President Volodymyr Zelenskyy nonetheless fawns on the Chinese, however discreetly, for example by inviting them to participate in the future reconstruction of Ukraine. We shall see what comes out of that.

Zelenskyy may have miscalculated. It is obvious that China does not care who controls Ukraine so long as its interests are protected. For that reason it failed to move, when Russia took Crimea in 2014 but kept the sea lanes of communications open.

Elsewhere China shows more generosity. A gigantic project of its Contemporary Amperex Technology Limited (CATL) has resolved to build a massive factory on over 450 acres to manufacture batteries in Debrecen, Hungary. At $7.5 billion USD, this is going to be Budapest’s greatest foreign investment ever.

The Debrecen plant will be a twin facility to the already existing CATL plant in Erfurt, Germany. Like there, the Hungarian-based installation will cater to pre-existing German clients in car manufacturing, including Mercedes, BMW, and other luxury brands.

Further, Guandong-based Eve Energy has signed a letter of intent to buy about 100 acres to build a similar plant that would supply parts for Western European car manufacturers such as Daimler, Jaguar, and BMW. The Chinese hope to dominate the European market of electric vehicles.

If the Chinese hope to somehow to pull the Hungarians into the loan diplomacy trap, the Magyars will simply nationalize their enterprises and that will be it. Budapest will not itself be dominated by any foreign power, at least not during Viktor Orban’s watch.

The U.S. meanwhile focuses most of its energy on Ukraine, missing other strategic opportunities in the region.