Hungary, China sign loan agreement for Budapest to Belgrade railway
Project has caused concern in Brussels, which wants to limit Chinese influence in the region
6 May 2020 | Michael Marray

CHINA has signed a debt financing agreement for the Hungarian section of the Budapest to Belgrade railway.

The 150 kilometre section of the railway on the Hungarian side of the border is being built by CRE Consortium, whose members include China Tiejiuju Engineering & Construction Kft, China Railway Electrification Engineering Group Kft and Hungarian conglomerate Opus Global.

This part of the project is estimated to cost US$2.1 billion, split between 85% loan financng from China and 15% equity from Hungary. Completion is expected by 2025.

The project is complicated since it crosses the European Union border between Hungary and Serbia. The latter can sign any construction and financing agreements that it sees fit, whereas, as an EU member state, Hungary is covered by rules on the award of major contracts and financing terms.

In 2017, the European Commission said it was looking into the details of the project. The project has caused concern in Brussels, which wants to limit Chinese influence in the region. But given the poor relationship between Prime Minister Viktor Orban and the EU, Hungary has been happy to negotiate bilaterally with China.

Announcing the loan agreement, finance minister Mihaly Varga noted that the new rail link will help Hungary to become a hub for European logistical networks, notably for freight travelling to and from China via Greece.

China Ocean Shipping Group (COSCO) owns a 51% stake in Piraeus port in Greece, and is working on better road and rail connections into Central Europe, as part of the Belt & Road Initiative.

The railway could make Hungary a "logistics centre" for the region, Varga says. "We can see that despite the coronavirus China remains an important engine for the global economy," he adds.

On the Serbian side the new and upgraded track runs for 200 kilometres. The main contractors are a joint venture between China Railway International and China Communications Construction Company.

Have you read?