Hungary acts as bridge for China’s companies
The Fujian Brand Trade Center, which provides space for 200 Chinese firms, covering two floors in a wing of Asia Center, was inaugurated last week, and the sixth China Brands exhibition opened with a forum involving representatives of various institutions of the Central and Eastern European region. The Budapest Times spoke to Rudolf Riedl, CEO of the Asia Center in District XV, who promotes business relations between Hungary and China with great enthusiasm and seems to be more successful in doing so than the Hungarian state.
What role does China play in the government’s economic policy programme of opening to the East?
China is a traditionally important trading partner of Hungary. it should be noted that the programme of opening to the East is not a new one. It was initiated under former prime minister Péter Medgyessy [in office 2002-2004]. China has since been a strategic partner of every Hungarian government, although Viktor Orbán himself earlier protested against China. Hungary also acts as a bridge for Chinese companies in the region. Hungarian companies are also looking increasingly towards China. The hot topic in the media of the sale of Hungarian state bonds to Chinese people granting them Hungarian citizenship is really a secondary topic, because they are not the only ones able to acquire such bonds. Nevertheless, it presents an attractive opportunity for entering the European region. Most of the Chinese people living here have long been Hungarian citizens. We can’t speak here about the risk of a Chinese wave of immigration.
How do the Chinese view Hungary as a trading partner? And can you comment on the current Hungarian strategy concerning trade with China?
With regard to Chinese people living abroad, Hungary is the largest “colony” in Central Europe. The Chinese people living here are so well integrated already that they are almost more Hungarian than Chinese. Those who are new to Hungary are looking for new markets and find a lot of opportunities here. I always recommend that they become brand producers in Europe and the USA, instead of nameless producers – as they were used to being, from China as exporters – because that creates confidence in the West and automatically leads to higher turnover. The Chinese government sees this the same way and provides these enterprises with financial support. It needs to do that because the Chinese are not so enthusiastic about moving abroad. However, since production costs in their home country are by now almost at the European level, they need to do that at some point. The EU also provides support to such enterprises in some cases, for example if a company establishes itself in eastern Hungary. If they have the products produced here they automatically gain the “made in EU” label as a selling point. Hungary offers the Chinese major logistic advantages. For example, in terms of transport links it’s the best-positioned country in the whole of the CEE region.
What are your aims in connection with the China Brands exhibition at the Center?
The exhibition is part of the long-term strategy of establishing the Center as the Asian trade centre of the CEE region. We want to promote trade between the two regions, for example by helping Chinese traders to set up business in Hungary. The idea is for them to see on the ground how the market functions here and how they can enter it with the help of the Asia Center. It’s the largest exhibition of its kind in the region. In this respect Budapest is the CEE centre. Ten million Hungarians, and as many as 150 million CEE citizens, can be targeted from here. The exhibition takes place twice yearly, once at the end of June/beginning of July and once at the end of November/beginning of December. Following their successful presentation at the exhibition, the next step is for the traders to be encouraged to have their products produced in Hungary too. The market here presents a lot of opportunities with regard to production and labour and is continuing to develop. Hungary, for example, offers a good, low-cost labour force and relatively low production costs.
In other words, as a private businessman you are almost performing the tasks of the Hungarian Investment and Trade Agency (HITA).
Yes, you could say that. We have a similar concept. However, here at the Asia Center we don’t develop a general policy of getting companies to set up business here. Instead we have access directly from the business sphere. We seek to encourage Chinese companies to establish themselves in Hungary. Our task is to show companies which products they can sell and how, and to support them in marketing and sales. HITA’s task is to offer companies the best possible place in Hungary and to make also possible state support available to them. Our activities complement one another, since we have different approaches to the same goal.
The Asia Center celebrates its tenth birthday this year. How would you sum up its development to date?
We celebrated the anniversary in April with our employees and customers, and further festivities will follow in September. On the one hand, I’m satisfied that we’ve already been able to implement a lot of our strategies. You could almost say that the 2008 financial crisis “came to our aid”. A lot of Chinese people seized the opportunity and made their way to Hungary, in particular to the CEE region and Hungary. The Asia Center has been a loyal partner to them over the years, enabling them to use our infrastructure and our network. Otherwise they would have had to go to great lengths to build up business here themselves – which certainly would have meant considerable initial difficulties for the Chinese with their somewhat different commercial and economic culture. On the other hand, I’m dissatisfied because we wanted to achieve a lot of goals significantly earlier. I would like the Hungarian government to create a better image of Hungary as a business location. Currently there are still too many superfluous political battles.
What kind of superfluous political battles are you referring to and how do they hinder you in achieving your goals?
Under the concept of “Hungary’s unorthodox economic policy” there is permanent wrangling with the EU to the detriment of the population and foreign investors. A lot of reforms, which were certainly necessary and some of which have even been implemented, have been ignored. All investors, regardless of their country of origin, would like to have a predictable business environment and legal environment. These firms need to generate profit, which is extremely difficult if the basic conditions keep on being changed.
In an interview with us in 2008 you said that you intended to stand down by 2012 at the latest and place management of the Asia Center in Asian hands. You are still active here. Do you find it difficult to hand over the reins?
The Asia Center is one of my many projects. I could happily spend less time here (laughs). However, there are still sufficient tasks that I need to perform personally. I can’t simply delegate maintaining relations in China to somebody else at short notice. That would likely create an awkward situation. I will probably hand over management of the Asia Center to my team, when it gets to that stage, rather than to somebody from Asia. I would like the Asian firms here to play a more active part in business and business development and be more active on the European market. After all, traders need to offer their wares to customers, rather than expecting customers to run after traders for their wares. That’s one of the differences between China and Europe. I need to convey that and a lot more to our customers, while acting as a mediator between the 12 nations that are under one roof here. My substantial experience abroad helps me in avoiding conflicts between the nations, while also being responsive to their regional characteristics. I’m proud of that. Dedication to such a task is important.
You also said in the interview that you would like to see solidarity between Hungary’s political camps and that Hungary should adapt proven solutions of others instead of always stubbornly doing things its own way. Do you still stand by those comments today?
Unfortunately the rifts between the political parties haven’t become any smaller, and I’d still like to see solidarity between them in the interest of everyone. In my view, for almost every problem in the world there’s already a country with a proven solution. However, wanting to find a unique solution in every case seems to be part of the Hungarian mentality. If a businessman behaved like that they would go bankrupt sooner or later.
You thought in 2008 that increasing the tax burden on companies was no longer feasible. What is your view of the special taxes that have been introduced in the meantime and to what extent do they affect your business?
I’m certainly affected by the special taxes. The government’s strategy doesn’t work because the more taxes it aims to collect, the more people try to avoid them. The more barriers are put in place that hamper the economy, the more alternative paths are sought and found, for example via abroad. The whole economy is suffering from that strategy, which seems to be a side effect of the flat tax, since it’s necessary to compensate for the lower tax revenues paired with higher salaries. The government’s approach of coming up with more and more types of tax and higher tax rates isn’t the right one. Instead the Hungarian state needs to be efficiently structured and offer taxpayers something in exchange for the taxes that they pay. You don’t even need to look to Asia for good examples. There are plenty of good examples in Europe, including in Germany and Austria, where you get good value for the high taxes, for instance in the form of good infrastructure, good education and training possibilities and a good social network. However, as an investment location Hungary offers very good general conditions. Budapest is also among the leaders in terms of quality of living in international comparison. That’s why I would certainly recommend Hungary to Chinese companies as an investment location despite the issues I mentioned.