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Budapest–Belgrade Railway (Hungarian Section)

Southern Hungary
Written by Ágnes Szunomár.
Updated on 11 January 2022.
Often billed by the Hungarian Government as a flagship project of the Belt and Road Initiative (BRI) in Europe, the Budapest–Belgrade Railway upgrade is a refurbishment of an existing (though old and outdated) railway line between the capital cities of Hungary and Serbia that aims to reduce the journey time from eight to four hours. The construction of the Hungarian section is to be financed by a 20-year, 1.855-billion-USD loan from the Export–Import Bank of China. It is the single most expensive rail investment in Hungary’s history.

Basic Information

Chinese Name: 布达佩斯-贝尔格莱德铁路/匈塞铁路(匈牙利段)
Location: Southern Hungary
Type of Project: Transportation; logistics.
Project Developer(s): Chinese–Hungarian Railway Non-profit Limited Company (CHRN), a joint venture between Hungarian State Railways (MÁV Zrt.) and two Chinese companies, China Railway International Corporation (CRIC) and China Railway International Group (CRIG).
Main Contractor(s): CRE Consortium, consisting of two subsidiaries of China Railway Group Limited (CREC)—China Tiejiuju Engineering & Construction Limited and China Railway Electrification Engineering Group—and Hungary’s RM International Limited. The Chinese and the Hungarian partners each hold 50% of the shares.
Financiers: Export–Import Bank of China (85%); Hungarian Government (15%).
Cost: 2.1 billion USD
Project Status: Under construction (expected to be ready in 2025)

Budapest Railway Station. P.C: Albert Koch (CC).

Project Outline

The Budapest–Belgrade Railway is 350 kilometres long, with 166 kilometres on the Hungarian side. It will be the final segment of a track linking the majority Chinese–owned Piraeus Port in Greece to Western Europe for the transport of goods, passing through North Macedonia, Serbia, and Hungary. However, the sections between Piraeus and Skopje and between Skopje and Belgrade have yet to be built.

The Hungarian section runs from Kelebia Village in the Southern Great Plain region of Hungary to Budapest. The route runs through rural parts of southern Hungary, across flat terrain free of natural obstacles. The line, however, does not pass through major Hungarian cities in the area, such as Szeged, even though these are hubs of commercial activity and the existing railway lines connecting them with Budapest are in very poor condition. Local governments lobbied for inclusion on the route of the new railway but were unsuccessful.

The railway line was first mentioned in 2013 at the Bucharest summit of the 16+1 Platform, a diplomatic forum between 16 Central and Eastern European countries and China. The construction agreement was signed in 2014 by the prime ministers of Hungary, Serbia, Macedonia, and China at the Belgrade summit of the 16+1. Construction work was supposed to begin in 2015 and the railway should have been operational by 2017, however, by December 2017, only the section between Belgrade and Stara Pazova was under construction.

The main reason for the Hungarian section being delayed for so long is that, in May 2016, the European Commission (EC) initiated preliminary infringement proceedings against Hungary, suspecting corruption in the deal, citing irregularities in the tender procedure for the contract, and uncertainties about what role Hungarian State Railways (MÁV) would play. In 2017, the EC was still looking into the details of the project but stopped short of a full investigation. The first tender for the railway upgrade was published in December 2017, right after the Budapest summit of the 16+1 Platform. This tender was later invalidated as the estimated cost of the project had increased by about 10%. A year later, in December 2018, the Hungarian Government launched a new public procurement procedure for the railway upgrade. Two consortiums, both including Chinese construction companies, bid in the public tender. Finally, in 2019, the tender was won by the CRE Consortium, 50% of which is owned by China Railway Group Limited (CREC) through its subsidiaries, China Tiejiuju Engineering & Construction Limited and China Railway Electrification Engineering Group. The remaining 50% of the consortium is held by RM International, a unit of Hungary’s Opus Global.

The Hungarian–Chinese consortium secured the construction contract in 2019, and Hungary and China signed the loan agreement in April 2020 under the ‘active coordination’ of the Chinese Government. In May 2020, the Hungarian Parliament passed a law codifying the commitment to the railway project and also classified information about it. Therefore, the specifics of the loan agreement are unknown, other than the fact the loan is worth 1.855 billion USD, with a 20-year repayment period, and a 2.5% interest rate. When announcing the signing of the agreement, Hungarian Finance Minister Mihaly Varga said the loan ‘carried a fixed interest rate and an early repayment option’, was ‘advantageous and secure’ for Hungary, and the terms were ‘favourable relative to the currently available debt financing conditions’, but he did not say what the exact terms were. Independent opposition MP Bernadett Szel subsequently sued the Hungarian Government, asking for disclosure of the agreement. On 7 October 2021, the court ruled the government must disclose the contracts within 15 days, but at the time of writing in early January 2022 this had not happened. According to current plans, the Hungarian section of the railway will be completed by 2025.

For the Chinese authorities, the construction of the railway could help to export overcapacities in engineering and construction, while also bringing logistical benefits by diversifying trade routes. In addition, if the refurbishment is ultimately successful, it could open doors to the European construction market for Chinese companies, as the project would demonstrate their ability to work according to EU standards. Hungary’s actions are driven by the government’s desire to become a transportation hub in Europe and to develop closer relations with China.

Project Impacts

  • Transparency: The feasibility study and the contract have been classified for 10 years by the Hungarian Government and, as a result, the public has no information regarding the potential benefits and disadvantages of the project (impacts on employment, local community, the environment, and so on).
  • Lack of Benefit for Local Communities: The railway will be constructed mostly by Chinese companies. Also, even though officially the project aims to make Hungary a transportation hub for Chinese products, major cities in southern Hungary have been bypassed by the railway line.
  • Financial Sustainability: The project is the single most expensive rail investment in Hungary’s history, and is financed largely through a loan provided by the Export–Import Bank of China. According to earlier calculations by logistics experts consulted by the newspaper Figyelő, the maximum number of trains per year will be 1,600 (4.4 trains per day), which means an increase of 1.6 million tonnes of freight traffic on the line. On this basis, the return on investment is estimated at 2,400 years. The details of expected traffic levels have never been released, nor have any hard figures been provided to make the case for rebuilds at such high expenditure.
  • Corruption: The fact the Hungarian partner in the joint venture contracted to build the railway is controlled by Prime Minister Viktor Orbán’s childhood friend has led to accusations of cronyism.

The phrase ‘transportation hub’ is often used by Hungarian Government officials when referring to the railway project. However, since the feasibility study has been classified, it is not known whether there is any evidence to support the idea that the new railway will play such a role. In addition, Chinese goods can already reach Europe more cheaply and efficiently through other ports on the Adriatic, such as Koper, Trieste, or Rijeka. The Hungarian Government also argues the investment is of the ‘highest public interest’; however, since the feasibility study and contract have been classified for 10 years, it is unclear on what basis such claims are made. Despite this, the Hungarian Government often refers to this railway as a flagship project of Sino-Hungarian cooperation.

Hungary’s commitment to boost its relations with China might be another explanation for the prioritisation of the project. The Hungarian Government regularly takes the opportunity to promote bilateral relations with the People’s Republic of China and supports it on many sensitive issues (for more details, see Hungary’s country profile). This engagement signals Hungary’s goodwill towards China and reinforces its status as a strong political partner in Europe. Engagement and alignment with China provide the Hungarian Government with leverage against the criticism and opposition Hungary faces in Europe.

Crony capitalism’—referring to an economy in which success in business depends on close relationships with government officials—might also play a role here. Lorinc Meszaros, a childhood friend of Prime Minister Orbán, owns Opus Global, which owns 51% of RM International Limited, the company that won the contract to build the Hungarian section of the railway together with two Chinese companies.

In-Depth Sources

Brînză, Andreea. 2020. ‘China and the Budapest–Belgrade Railway.’ The Diplomat, 28 April. Link.

Inotai, Edit. 2020. ‘Budapest to Belgrade: All Aboard the Secret Express.’ Baélkan Insight, 22 April. Link.

Kafkadesk Budapest Office. 2020. ‘Belgrade–Budapest High-Speed Train: Highway to Rail?’ Kafkadesk, 15 May. Link.

Káncz, Csaba. 2020. ‘The New Budapest–Belgrade Railway Line: A White Elephant on the New Silk Road.’ China Observers in Central and Eastern Europe, 15 June. Link.

Keller-Alánt, Ákos. 2019. ‘Whose Line Is It Anyway?’ EchoWall, 8 August. Link.

Rencz, Flóra. 2019. The BRI in Europe and the Budapest–Belgrade Railway Link. EIAS Briefing Paper 10/2019, October. Brussels: European Institute for Asian Studies. Link.

Rogers, Samuel. 2019. ‘China, Hungary, and the Belgrade–Budapest Railway Upgrade: New Politically-Induced Dimensions of FDI and the Trajectory of Hungarian Economic Development.’ Journal of East-West Business 25(1): 84–106.

Vörös, Zoltán. 2018. ‘Who Benefits from the Chinese-Built Hungary–Serbia Railway?’ The Diplomat, 4 January. Link.

Updated on 11 January 2022.

Ágnes Szunomár, PhD is a Hungarian economist studying China’s economic footprint in Central and Eastern Europe (CEE). She is the head of the Research Group on Development Economics at the Institute of World Economics, CERS, Hungary and an Associate Professor at Corvinus University, Budapest. With more than 100 scientific publications, Ágnes has led and participated in several international research projects. She is a member of the European Cooperation in Science and Technology (COST) Action ‘China in Europe Research Network’, where she is the head of Working Group on Strategic Sectors and Infrastructure Developments. She is also a member of China Observers in Central and Eastern Europe (CHOICE) network.