Financial cooperation of Beijing, Budapest bears fruit
Hot topics such as digitalization and sustainability clearly reflect the tremendous challenges of the 21st century. Economists, geopolitical analysts, politicians and journalists are trying to identify the ongoing and future patterns of the digital and green transition, as well as the impact on international relations and the world economy.
Finance is key for channeling resources toward 21st-century innovators and entrepreneurs who have strong visions about a sustainable, green and equitable growth model that provides shared benefits for the global community. According to a 2023 publication of the Asian Infrastructure Investment Bank, until 2040, the world needs about $84.5 trillion in infrastructure investment, including $16 trillion in sustainable infrastructure financing. It is not just the volumes that matter. The story is more about innovative financial solutions and international cooperation, which are able to allocate and deliver the required funds to the right projects.
The financial cooperation between Hungary and China is a good example of such constructive actions. As we mark the 75th anniversary of the establishment of diplomatic relations, it is time for our two countries to highlight the success of our thriving bilateral financial links over the past two decades. One of the first milestones was the Bank of China choosing the Hungarian capital, Budapest, as its regional headquarter in Central and Eastern Europe. Later, China Construction Bank also opened a branch in Budapest. Thanks to their activities, Hungary has become an important regional center for renminbi settlements and financial services, which added further links to the outstanding network of Hungary as a complex economic, financial, trade, logistical and intellectual hub.
China attaches great importance to cooperation with Central and Eastern European countries under the Belt and Road Initiative. In the same way, the Hungarian government and Magyar Nemzeti Bank, the central bank of Hungary, have also been taking decisive steps to foster the relationship between Hungary and China.
In 2010, Hungary announced its Eastern Opening policy which resonates well with the aims of the BRI.The MNB launched its Central Bank Renminbi Program in 2015.Its results include the development of the RMB settlement infrastructure between Hungary and its partners; the buildup of an RMB-denominated portfolio within the central bank reserves; favorable arrangements for RMB liquidity management; and last but not least, a regular platform for professional dialogue about RMB-related topics, the Budapest Renminbi Initiative Conference organized annually by the MNB.
Recently, Hungary also tapped into the opportunities of green financing available in China. In 2021, Hungary was the first sovereign country to issue green panda bonds in the Chinese market. This 1 billion yuan issuance was followed by another one in 2022(2 billion yuan), and in 2024, the government-announced plans to tap the market again. This decision is underpinned by the fact that according to some estimates, the EU needs to double its green investments compared to the pre-pandemic level to reach the 2050 carbon neutrality goal.
Hungary has accumulated significant experience in mobilizing Chinese funds for its development, both in the private and public sectors, as China has become one of the biggest foreign investors in our country. In 2023, Hungary overtook the United Kingdom, Germany and France as the biggest recipient of Chinese foreign direct investments in Europe. The share of Hungary in the total Chinese FDI in Europe was 44.1 percent last year, while the "Big Three" had 35.3 percent.
Great achievements must pave the way for stronger future accomplishments. Digital and green finance are priority areas where cooperation between China and Hungary can produce further tangible results.
China has been a pioneer in developing central bank digital currencies, and thanks to our regular exchanges with the Digital Currency Institute of the People's Bank of China, we can learn and share firsthand experience about the ongoing CBDC-related initiatives both in Hungary and China. The MNB has been granted an observer status in the Multiple CBDC Bridge Project, in which the PBOC and its partners have already reached the minimum viable product stage for a groundbreaking cross-border CBDC payment platform.
Looking ahead, CBDCs are likely to catalyze the deep changes in our century as they provide a good basis for smart contracts, quick and seamless international payments, and for sure, they will spark innovation. We will witness the rise of new financial products, new types of financial institutions and a new landscape of finance which integrates the emerging economies of the world. Thanks to our efforts, Hungary is now an excellent test bed for financial innovation and is ready to forge ahead with international partnerships for "win-win-win" outcomes. We have understood the formula of success in the 21st century: the combination of talent, knowledge, technology and capital, which multiply each other if a conducive environment and the right incentives are provided.
Joint efforts in this respect are urgent, and our approach needs continuous refinement in order to achieve long-term sustainable development. So it is wise to learn from the great ancient Chinese strategist, Sun Tzu, who once said: "Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of circumstances."
The author is governor of the Magyar Nemzeti Bank, the Central Bank of Hungary.
