Hungary secures Chinese loan and investment deals

By bne IntelliNews May 2, 2012

Tim Gosling in Prague -

China agreed to hand Hungary a €1bn development loan on May 1, and announced several investment deals including agreements on infrastructure and finance.

With China looking to leverage its massive cash reserves to take advantage of the debt crisis, it announced last week during a tour by Premier Wen Jiabao that it is to set up a €10bn development fund for CEE. This week, Vice Premier Li Keqiang paid a two-day visit to Hungary to put the seal on several agreements in the struggling CEE country.

Budapest will be delighted to sign the agreement with China Development Bank on a €1bn finance framework, as it will offer it a better negotiating position in forthcoming talks with the IMF and EU over a bailout. It may even help it avoid those talks altogether - not that investors will want to hear such talk. The deal was signed by Hungarian Economy Minister Gyorgy Matolcsy and representatives of China Development Bank, reports dpa.

Ahead of Li's visit, Matolcsy said that he hoped Hungary could capitalize on an "excellent proposal from the Chinese government" to grant credits via the bank for joint projects especially in eastern and northern Hungary.

Other agreements Li's delegation signed included investment deals in agriculture, telecoms and infrastructure, with the news helping add momentum to the rally in Hungarian assets sparked by Brussels' agreement to start the bailout talks on April 25.

Prime Minister Viktor Orban will also have much to boast about after claiming earlier that China was ready to build a 20km rail link between the airport and the centre of Budapest. The PM was derided in some quarters when the project - like many others he claimed had been agreed with Beijing - failed to show up. Now, China Civil Engineering Construction Corp has signed a memorandum worth $1bn to build the link.

Negotiations are still under way, and the two sides will try to find the proper way on funding and finance, chairman Liu Zhiming told the press. However, assuming it follows the classic pattern, the state-owned construction giant should face little trouble locating cheap state loans to power the project.

Meanwhile, communications equipment giant Huawei Technologies agreed to set up a logistics center in Hungary, after announcing plans last year to set up a manufacturing operation. "Hungary is the center of Europe, and it boasts a developed logistics industry and service sector," Justin Zhang, a Huawei public relations manager for CEE, told China Daily.

Hungary "really welcomes Chinese investment, as we help to create jobs here and stimulate the economy," said Chang Xiaowei, a sales and marketing manager for CEE at ZTE. His ICT company also agreed to set up an operating maintenance center in Hungary on May 1, which will target consumers across Europe.

The two countries' commerce and agriculture ministries also signed cooperative memorandums on cooperation amongst small and medium-sized enterprises and in agriculture.

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