China’s Eurorail Dream

Quartz Creative on behalf of HSBC

The century old railway connecting Belgrade to Budapest has fallen into disrepair, with the 217-mile journey taking around eight hours. Seen as a potentially lucrative opportunity, China are planning to build a new $3.7 billion high-speed rail line between the Serbian and Hungarian capitals as part of the Belt and Road Initiative. The route would significantly cut down transit times between the two cities, and connect with the Chinese-owned Mediterranean port of Piraeus, on the Greek coast, to establish the BRI’s first major inroad into the Eastern Europe market.

Construction on the Serbian stretch of the railway began in November, financed by a $297.6 million loan from China’s Exim bank. The Hungarian portion has been delayed as the project goes through the public procurement procedures of the European Union, of which Hungary is a member. (Serbia is a prospective EU member, so it is not subject to the same regulations.)

Both Hungary and Serbia see China as a partner to develop infrastructure that the EU can’t – or won’t – yet finance. “For these countries the potential of getting Chinese investment in areas where the EU is not investing is very attractive,” says Angela Stanzel, Senior Policy Fellow and editor of China Analysis at the European Council of Foreign Relations. “One such area is infrastructure.” Adds Stanzel, “Serbia, in particular has huge gaps in infrastructure, and since it’s not an EU member it also has no right whatsoever to apply for such kind of funding."

In addition to the construction of the railway itself, which will potentially create local jobs and pump money into local economies, the new route will open the door to further Chinese investments, and connections to new markets.

Though EU standards may slow the project down, China has every incentive to jump through those regulatory hoops and see it through. Stanzel points out that the Belgrade to Budapest railway is the biggest project yet associated with the so-called “16 + 1” group of Central and Eastern European countries that have formed an economic alliance with China. “So if this one works,” Stanzel says, “we can expect that other projects will definitely work.”

A feature by Quartz Creative