State-owned Hungarian Electricity Works (MVM) signed a contract on September 4 raising its credit line with Bank of China from €250mn to €350mn. The term of the five-year credit line was also extended by two years, until 2026.

MVM may call down the credit in forints, euros or dollars. MVM chairman-CEO Gyorgy Kobor said the company needs the bigger credit line to expand its integrated services. Bank of China's chief executive in Hungary Xu Haifeng said the new agreement shows the lender's commitment to Hungary's energy sector and can contribute to the strengthening of economic ties between China and Hungary.

Bank of China opened its Hungarian branch in 2003. It was the first commercial financial institution established by the Chinese bank in Central and Eastern Europe.

The conservative government of Prime Minister Viktor Orban stepped up efforts to improve political ties with China with the launch of the Opening to the East policy in 2010. The plan involved strengthening ties with countries outside the EU, mostly in fast-developing countries in Asia.

The government hoped to see a third of exports going to this region, but that has clearly failed to happen. Sales to China were below $3bn last year, only a fraction of the country’s €105bn total exports.

Although political ties improved significantly, Chinese investments in Hungary have reached $4.5bn so far, but a large chunk of this was linked to a single transaction, the $1.6bn acquisition of chemical company BorsodChem by Wanhua Group from 2011.

Hungary’s favourable geographic location, easy access to EU markets, and the friendly political and investment environment are the most frequently mentioned reasons for Chinese investment in Hungary.

Hungary was the first EU member state to join the Belt and Road Initiative (BRI) as the government wants Hungary to play a central role in attracting Chinese investments.

Since the first China-Hungary Belt and Road Initiative working group meeting in April,  two direct flights connecting Hungary and China has been launched, Hungary's government has signed strategic cooperation agreements with seven Chinese companies, the number of Chinese tourists visiting Hungary has quadrupled and the first joint Hungarian-Chinese university programme has been launched, Foreign Affairs and Trade Minister Peter Szijjarto said in July.