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China Belt and Road Initiative Journal: Research Analysis and Perspectives

ISSN 2515-9402

EISSN 2515-9410

Financial Cooperation Between China and Hungary: a Hungarian Perspective

Eszterhai Viktor

Volume 2, Issue 1, January 2019

Special Issue “16+1” Cooperation and Chinese Investments in Central and Eastern European Countries

Abstract:

The early financial cooperation between Hungary and the People’s Republic of China goes back
to the time of the socialist brotherhood era in the 1950’s. After the Chinese civil war, the Soviet Union
and other socialist countries sold industrial products on credit at a low (less than 2%) interest rate to the People’s Republic of China to help the reconstruction of the economy. However, after the Hungarian Revolution of 1956, it was China (besides the Soviet Union) that provided a loan (100 million roubles) in order to stabilize the position of the Hungarian government. In the 1960s the growing tension between the Soviet Union and China had frozen this fruitful but low intense cooperation. The relation of the two countries only started to normalise in the late 1970s, especially after the launch of the “reform and opening up” since by that time Hungary had already introduced some cautious market economic reforms called the “new economic mechanism” in 1968, which had become a model worth investigating for China. Chinese delegations examined Hungary’s experience in the financial and banking sector and several interpersonal relations were established and strengthened. The deputy governor of the Magyar Nemzeti Bank (MNB, the Central Bank of Hungary), János Fekete’s connection became especially important during this period. In the case of finance, the most attention was paid to Hungary’s integration into the global financial institutions like the World Bank and International Monetary Fund (IMF). China’s role, however, was more than just observation: when the decision on Hungary’s accession to the IMF was passed, the People’s Bank of China provided USD 88 million, which was a criterion for the membership, as part of the Special Drawing Right (SDR) quota of USD 375 million. Due to the lack of money of the MNB, the loan provided by China was necessary for the successful accession to the IMF.

Content :

1. The Background

2. From the 2000s to 2015: Early Steps

3. The Eastern Opening

4. Implementation and Results

5. Other Actors

6. Conclusion