Levente Horváth
20/03/2023 15:00
- The Belt and Road Initiative (BRI) launched by China is a transcontinental, long-term development strategy along the former Silk Road to build transport connectivity and close infrastructure gaps that limit trade, economic integration, openness and prosperity. How do you see the role of the Belt and Road Initiative in the Eurasian cooperation?
- The Belt and Road initiative is creating a new model for economic and trade cooperation, and connections between people. The programme will promote the healthy development of economic globalisation. The BRI is a global public good. The Belt and Road takes you across the continents of Asia, Europe and Africa. At one end are the dynamic East Asian economies, at the other the economic players of developed Europe, while in the middle is a vast hinterland with its own huge development potential and diverse resources. The Belt and Road mostly concerns emerging economies and developing countries, which, according to the World Bank, accounted for 62.2 per cent of the world’s population and 30.9 per cent of world GDP in 2021. The stakeholders of BRI are building a community of mutual political trust, economic integration and cultural inclusion. This is of great importance for the promotion of peace and development in the world.
The BRI has set the Eurasian countries on a path of opportunity towards shared prosperity. The volume of bilateral trade between China and the CEE countries under the Belt and Road Initiative reached USD 129.4 billion. Imports and exports between China and its three largest trading partners in the region - Poland, the Czech Republic and Hungary - grew by 26.7 per cent, 4.8 per cent and 25.4 per cent respectively. Despite the epidemic, projects under the Belt and Road programme have continued to make progress. In the future, the BRI cooperation will play an important role in promoting the RCEP (Regional Comprehensive Economic Partnership) and the Eurasian Economic Union, making a significant contribution to the opening and integration of the Eurasian region.
The principle of mutual benefit
- The rapid development of the BRI has been visible since the launch of the programme. 146 countries have already joined the initiative. What are the benefits of the BRI for the Eurasian nations?
- Under the programme, China is promoting a new development paradigm, adhering to the principles of inclusive consultation and mutual benefit. We see not only the physical interconnection of infrastructure as an important direction, but also the “soft” interconnection of rules and standards, and the “heart-to-heart” contact between the peoples of the countries concerned as an important basis. The cooperation has helped unlock the economic potential of the Eurasian countries along the Belt and Road and increased their collective competitiveness on the international market. The initiative helps to eradicate poverty in the countries that are building together under the programme. By the end of 2021, according to the Chinese Ministry of Commerce, the economic and trade cooperation zones of 46 countries along the BRI route will have provided 392,000 jobs for local residents and generated an additional 6.6 billion USD in tax revenue for the host countries. China has taken a green approach to the joint construction of Belt and Road, strongly supporting low-carbon energy development in the developing countries. The new development philosophy of cooperation is one of innovative, coordinated, green and open development for all.
- China Construction Bank is one of China’s big four banks and one of the world’s largest financial institutions, with many branches internationally. How is the BRI supported? Do you have related projects in the Eurasian region?
- Our bank supports the Belt and Road Initiative with the “finance + solutions” service concept. For example, strengthening high-level planning, which the CCB has supported by developing guidance documents. We prepared a comprehensive financial services plan for the New Silk Road Economic Belt and the 21st Century Maritime Silk Road. Along the Belt and Road, we have set up institutions in nine countries: Vietnam, Russia, New Zealand, the United Arab Emirates, Poland, Indonesia, Malaysia, Kazakhstan and Hungary.
The CCB has also provided financial support to more than 200 BRI projects in Eurasian countries such as Poland, Serbia, the United Arab Emirates, Vietnam and Saudi Arabia in the fields of energy, transport and other infrastructure. In recent years, CCB has committed itself to serving major international trade corridors such as the China-Europe Rail Express and the new international land-sea trade corridor.
CCB is committed to improving people’s well-being. Just one example: In 2019, we arranged a foreign syndicated loan for a Chinese company to exploit mineral resources in Serbia. This business has invested in improving the local environment and ecological conditions, engaged in a variety of charitable and philanthropic activities, donated emergency medical equipment, helped purchase equipment for local hospitals. Our Bank also attaches great importance to protecting the environment and promoting sustainable and healthy development.
A new chapter can be written
- Hungary was one of the first European countries to join the Belt and Road Initiative. Because of its favourable geographical location and its links with the West and the East, Hungary can be seen as a gateway or bridge between the EU and China. How do you see Hungary in the Belt and Road Initiative? How can Hungary contribute to the sustainable development of the Eurasian region?
- As part of this initiative, Hungary has long been an important gateway to Europe, and it is one of the major distribution centres for Chinese goods in Europe. In November 2021, China and Hungary signed two agreements to promote investment and cooperation in green development and the digital economy. Chinese companies continue to invest heavily in Hungary, with investment projects covering a range of sectors, including infrastructure and green energy. The number of freight trains running between China and Hungary and the volume of cross-border e-commerce is steadily increasing. Chinese financial enterprises want to make a greater contribution to Hungary’s economic development.
As the BRI deepens further, there are more opportunities for cooperation between China and Hungary. A new chapter can be written in bilateral economic and trade cooperation. For example, the Local Cooperation Mechanism between China and Hungary was officially launched in November 2020, offering opportunities for cities with complementary resources. This can help expand industrial clusters and industrial chains. Hungary lies in the middle of the European continent. As a member of the EU, it boasts an unrivalled infrastructure network and a constantly improving logistics capacity. This also encourages Chinese e-commerce companies to enter the European market and act as a gateway for European and Hungarian goods to the Chinese market. The green economy also offers further opportunities. There are more and more cooperation projects in the field of clean energy, a good example in Hungary being the photovoltaic power plant in Kaposvár. In the future, the two countries could actively explore new green products and services, and set up funds to support key areas.
East-west hub
- CCB has opened a branch in Hungary and established a financial technology innovation laboratory in Budapest. Why did CCB choose Hungary as the location for a new European branch? What are your plans for the fintech lab?
- CCB considered three aspects when considering opening a branch in Hungary. The first is that Hungary has a favourable business environment, being a hub for Eastern and Western Europe. As a member of the EU, it has a well-developed economy, a solid legal system and open financial markets. Not only does it serve as a European manufacturing base and logistics distribution centre, but it is also characterised by a cost-effective workforce, a favourable investment policy, good infrastructure and considerable industrial strengths. As one of the first countries to recognise the newly established People’s Republic of China, Hungary has maintained stable and friendly relations with China. Our people have also forged a strong bond. I believe that under the auspices of the Belt and Road Initiative, there are huge opportunities for our countries to cooperate.
The second is that China and Hungary have deepened cooperation in the internationalisation of the renminbi (RMB). Hungary was the first country in Central and Eastern Europe to establish an RMB clearing bank and issue RMB bonds. The opening of the CCB (Europe) branch in Hungary could facilitate Hungary’s efforts to establish an offshore RMB market in Eastern Europe.
The third aspect is that China and Hungary should capitalise on the growing momentum of digital cooperation. Ever since President Xi Jinping proposed actively leveraging bilateral ties in the emerging fields of digital economy and artificial intelligence in a phone call with Hungarian Prime Minister Viktor Orbán in May 2020, our countries have established digital economy partnerships with concrete actions. CCB hopes to fully leverage its strengths in fintech to enhance digital cooperation between the two countries.
With the increased support of the Magyar Nemzeti Bank, the CCB (Europe) Hungarian Branch has set up a fintech innovation lab. The lab will make extensive use of online tools and technologies, including artificial intelligence, virtual reality, 3D exhibition space and live webcasting, to provide services and major matchmaking projects for its clients. The lab will reach out to other regions of the EU and explore the potential of using quality resources in Hungary and across Europe.
Personal carbon ledger
- China Construction Bank is committed to sustainable development. Do you have a defined strategy, projects to support zero-carbon targets or green financing?
- We have developed green financing strategies to stimulate a comprehensive transformation of the economy and society. in 2016, we published the five-year Green Credit Development Strategy. In 2022, we introduced a strategic plan for the development of green finance (2022-2025). Our vision is to become the world’s leading bank for sustainable development. The balance of green loans issued by CCB has already exceeded RMB 2 trillion. To further support green projects, we offered businesses diversified products and services such as green loans, green bonds, green trusts, green leasing, green asset management and green insurance. In addition, CCB is expanding its green financing channels by underwriting green bonds, including the first batch of carbon neutral bonds on the Chinese market.
We have also introduced a “carbon ledger” for personal financial services. We identify users’ green behaviour with the CCB Lifestyle app, mobile banking app and other terminals. We will then use big data and artificial intelligence to measure and calculate carbon emission reductions, and finally develop a personal “carbon ledger” to record consumers’ carbon footprints. Based on the “carbon ledger”, CCB also offers personal finance services such as credit card limit waivers, preferential instalment payments and points redemption. In this way, we are guiding customers to live a low-carbon life.
- Hungary is keenly interested in financial innovation, and is participating in several international projects for this purpose. Your bank is involved in the testing of China’s central bank digital currency (CBDC). Are there plans to extend the CBDC testing to Hungary?
- In order to advance the research and development of the digital yuan, the People’s Bank of China (PBoC) is exploring the applicability of CBDC in cross-border transactions. We look forward to the research cooperation on CBDC between the PBoC and the Magyar Nemzeti Bank as soon as possible.
The author is the Director of the Eurasia Center of John von Neumann University
This article was originally published in our Hungarian-language magazine Eurázsia in 2022.