Joint venture with China

MIHÁLY PATAI, DEPUTY GOVERNOR OF THE MAGYAR NEMZETI BANK ON THE RISE OF ASIA AND THE NEW ROLE OF THE RENMINBI

by Mariann Őry Photos: Róbert Hegedüs

ASIA HAS REALISED THAT, CONTRARY TO WESTERN THINKING, IT IS NECESSARY TO COMBINE STATE AND MARKET LOGIC, SAYS MIHÁLY PATAI. WE SAT DOWN WITH THE DEPUTY GOVERNOR OF THE MAGYAR NEMZETI BANK (THE CENTRAL BANK OF HUNGARY) TO DISCUSS THE IMPORTANCE OF DIGITALISATION AND GREENING, THE INTERNATIONALISATION OF THE RENMINBI AND THE REGIONAL ROLE OF BUDAPEST.

- During your career, you have gained a wealth of experience in the financial world, both in the East and the West. What is different about negotiating with Eastern and Western partners? What do you need to succeed?

- The most important thing is to be able to represent your interests very clearly. This is valued by both types of thinking. An important difference is that in Eastern business, it is more important how long the relationship has been established, how well it has been tested, and how durable and consistent it is. In the West, rationality is usually the deciding factor. If a business proposal suits the client, it is easy to close the deal. In the East, it takes more time.

- What do you see as the main reason for the rise of Asia today?

- In Western economic thinking, there has always been a pendulum effect - mainstream economic thinking has stuck to a doctrine for decades and then changed it. From the mid-1930s to the mid-1970s, the thinking was dominated by a mindset that attached great importance to the role of the state. Then, from the mid-seventies, when Hayek and Friedman were awarded the Nobel Prize, a new phase began, which lasted until 20082009, when the market was seen as the dominant factor. The issue is always the relationship between the market and the state, ultimately, the primacy of the ‚invisible hand’ and the ‚public hand’. In this way of thinking, Asia has broken new ground in the last thirty or forty years, showing that the state mindset must be combined with the market mindset. I think this is the key to the success of Japan, Korea and especially China. In Asia, they have combined these two mindsets, which have always alternated in the West.

- How is Hungary involved in promoting the internationalisation of the renminbi?

- After the Hungarian government announced the policy of Eastern Opening thirteen years ago, the Magyar Nemzeti Bank has also stepped in, having signed an agreement with the Chinese central bank ten years ago and launched its renminbi programme in 2015. In other words, we use the renminbi as a world currency. So the Monetary Council has decided that we will also hold renminbi assets in our reserves. From the same year onwards, we will also organise the Budapest Renminbi Initiative Conference.

- Why is this effort important?

- Today, the renminbi accounts for about three per cent of total world reserves and total world trade, while the largest trading nation in the world today is China. They are also by far the largest exporters and importers; for some thirty countries, China is the most important export market, including the major Euro-Atlantic countries, and for some seventy countries, China is the largest import market. But the function of money does not support this. So there is an inevitable need for the renminbi to internationalise.