Foreword by the editors

Foreword by the editors

Mihály Patai, Deputy Governor, Magyar Nemzeti Bank Marcell Horváth, Executive Director for International Relations, Magyar Nemzeti Bank

Although the rise of Eurasia as a new power centre is one of the hot topics of our decade, those who wish to dig deeper in this topic might be surprised by the scarcity of comprehensive literature on this subject, i.e. the relatively low number of works analysing the notion of Eurasia using a truly multidisciplinary approach. This recognition motivated the central bank of Hungary to create a unique volume of studies which combines several fields of social sciences to better understand the patterns of the “Age of Eurasia”. We believe that the global community is at the dawn of a new era, characterised by a multilateral world order and the prominence of Eurasia as one of the most important players on the international stage. Thus, leveraging the MNB’s international network, we invited several experts to discuss different aspects of Eurasian cooperation, including economy and finance, infrastructure and connectivity, geopolitics and education. In doing so, we created a collection of the thoughts and perspectives that have been reflected in the annual Budapest Eurasia Forum organised since 2019.

In this volume, readers from various backgrounds – be they researchers, academics, government officials or members of the business community – can find valuable content and input for their work. The studies provide insights not only into the historical foundations of Eurasian partnerships, but also the rise of the supercontinent as a new power centre and the most significant hub of the 21st-century megatrends: the emergence of geopolitics, sustainability, digitalization and the transformation of money. The

volume elaborates on specific current topics such as the prospects of different regional cooperation formats, the role of central banks in greening the economy and fostering human capital, or best practices to encourage innovation and build smart cities, to name but a few. In the following summaries, we capture the essence of the studies, which are all intended to be the part of the same “puzzle”, the same big picture highlighting the opportunities of the “Age of Eurasia”. To set the stage, the volume starts with an introductory study by Marcell Horváth, Executive Director for International Relations, as well as Eszter Boros and Györgyi Puhl, international advisors at the MNB. The authors’ goal is to give a better understanding of the constantly changing world order and how the rise of our supercontinent could influence global developments. The study first examines the concept of Eurasia from historical and geopolitical aspects, and shows that Eurasian cooperation, for example along the ancient Silk Road, was always present and has had a great effect on European and Asian societies. Today, Russia, Kazakhstan and Turkey have also developed their own Eurasian vision, and China, reviving the ancient Silk Road, has launched the Belt and Road Initiative (BRI), which might have the biggest impact on the multipolar world order. The paper shows that the 21st-century megatrends of sustainability, digitalization and the future of money offer good opportunities for broader Eurasian cooperation. Partnership in these fields serves the interests of both Asia and Europe. The first chapter is about geopolitics. The study by Dmitry Erokhin, Sergey Tkachuk and Elena Rovenskaya, experts at the International Institute for Applied Systems Analysis (IIASA), reflects on the global spread of COVID-19, which is changing the opportunities and trends all across Eurasia. During the fight against the pandemic, nations had to realise that effective measures could only be taken in cooperation with the international community. Behind the scenes, a new kind of relation system

building was seen as well, due to the interdependence of nations. Eurasia is a great example for the building of new economic centres in the world. The Eurasian multilateral cooperation had an outstanding period during the first wave of the pandemic. Thus, it is a time to rethink the mutually beneficial cooperation platforms and continue building Eurasian geo-economic relations. David A. Jones, Professor of the Institute of International Relations at the University of Warsaw, also highlights the new trends arising in Eurasia owing to the pandemic. According to Jones, Eurasia has embarked on its own path to becoming a powercentre of the world politics in the next decade. Nonetheless, different superpowers can influence the political developments in the European and Central-Asian countries. China is clearly strengthening its position as a superpower with the Belt and Road Initiative, while the USA and its Atlantic allies can also achieve new kinds of roles, especially in Europe. Meanwhile, soft-power tools have become even more important in political and economic connections in Eurasia. This also underlines the fact that global geopolitical relations will not be the same as they were before the pandemic. Sharing this conclusion, three international experts at the MNB – Nóra Anna Sándor, Dávid Szabó and Péter István Szabó – examine the US-China-EU triangle from a geopolitical point of view. They find that the USA, through its Atlantic alliance system, is the most influential power regarding developments in the European Union, but that China is also growing its interests in Europe. The Asian giant would like to build an alternative alliance system in order to strengthen a G2 world power system at the global level in future decades. Against this background, European nations intend to build an interest-based common foreign policy system at the EU level. It is a clear interest of the European countries to find a balance between the West and East and choose the most appropriate investment and development opportunities offered by the global superpowers.

The second chapter examines a related topic: multilateral cooperation. The paper by Norbert Csizmadia, Head of the Board of Trustees of the Pallas Athene Domus Meriti Foundation (PADME) in Hungary, presents an interesting discussion on the role of the BRI and the Digital Silk Road in creating a new and interconnected Eurasia. The author shows that economic geography, the geography of knowledge and the fusion of places (“geofusion”) are playing an increasingly important role in our age as competition is for markets, talent and technology, rather than territory. The initiatives under the umbrella of the BRI, such as the Digital, Green and Health Silk Roads offer various opportunities for high-quality, open, zero-carbon and inclusive development. The thoughtful paper by Zhimin Chen, Vice President of Fudan University, and Xiaotong Zhang, Professor of Fudan University, also analyses China’s Belt and Road Initiative. The authors argue that the BRI goes beyond classical geopolitical theories which put excessive emphasis on competition between land and sea power. The authors show that the project aims to connect land and sea via a complex network of ports, roads, railways and power grids, and therefore create a free and open functional zone, maintained by the logic of the market, rather than power and conflicts. These important findings are even more remarkable in the post-COVID era when “maximal connectivity” needs to be restored to reap economic benefits on a global scale. The next paper by Márton Ugrósdy, Director of the Institute for Foreign Affairs and Trade in Hungary, is a real “gap filler” in the field of multilateral cooperation, as it takes stock of the different regional initiatives throughout Eurasia, such as ASEAN, the Shanghai Cooperation Organisation, the Eurasian Economic Union, the Turkic Council, the Free and Open Indo-Pacific and the Quadrilateral Security Dialogue. The study not only describes these formats, it also compares them in terms of their membership, goals and influence. The discussion is embedded in a broader

geopolitical context of the great power rivalry between China and the United States as “heartland” and “rimland” powers. The author concludes that small regional formats could flourish even in the current geopolitical setting, if they address the real and tangible needs of their members. These insights provide the background for the third and fourth chapters on economy and finance. In the third chapter, Barnabás Virág, Deputy Governor of the MNB, draws attention to the role of environmental considerations in the field of monetary policy. He highlights several efforts by the MNB to encourage green growth, underpinned by the new sustainability mandate of the central bank, enacted in 2021. The MNB has adopted a “Green Toolbox Strategy”, and the bank’s Bond Funding for Growth Scheme has taken green bonds onboard. The analysis of these measures rests on an international outlook proving that many central banks in Eurasia have started to incorporate green aspects in their policies as a new opportunity for multilateral cooperation. In line with efforts for high-quality economic growth, the paper of Junkuo Zhang, Vice President of the Development Research Center of the State Council of the People’s Republic of China, provides first-hand insights into another important field of human development: innovation. Zhang describes the policies of “reform and opening up”, which have helped China to become one of the world’s leading scientific and technology powerhouses. The main element of these policies is the establishment of different types of innovation zones. The paper discusses the achievements in the field of scientific development, such as the rapid increase in the number of Chinese patent applications. Sharing the experience of the innovation zones helps other Eurasian countries to create more efficient policies as well. In the same spirit, Sang Hyeong Lee, Deputy Governor of the Bank of Korea (BOK), sheds light on Korea’s comprehensive development strategy, the world-renowned Korean New Deal project. The paper also summarizes the BOK’s stance on CBDC,

climate change, payment and settlement system, among others. The author argues that since the outbreak of COVID-19, many countries have been pressing forward with the transition to digital and low-carbon economies; however, it seems that these efforts cannot be achieved by a few countries alone. Given the similarities between the Korean New Deal and the EU’s approach toward climate change, there will likely be fruitful policy cooperation with regard to circular economy and green finance. The chapter on finance starts again with green development, but focuses this time on the greening of the financial system. The paper by Csaba Kandrács, Deputy Governor of the MNB, and Balázs Sárvári and Renátó Ritter, analysts at the MNB, highlights the impact of climate-related shocks, which lead financial institutions to seek to embed climate-related effects in their models and central banks to integrate this issue into their mandates. The study also shows the differing positions on central banks’ mandate and climate change and different taxonomies in Europe and Asia. The authors review the development of the green bond market and factors supporting green bond issuance. They argue that given the scale and complexity of the issue of climate change, a humble approach from regulators to cooperate with each other and with other related actors would be necessary. In the next paper, Xiaochuan Zhou, Vice Chairman of the Board, Boao Forum for Asia (BFA), draws attention to the key aspects of the digitalisation of China’s payment system. The study discusses China’s great achievements with regard to digital currency and electronic payment (DC/EP). Although the incumbent technology serves perfectly for financial transactions, trade settlement and investment settlement with regard to cross-border payments, there is still room for improvement in the case of tourism, internet shopping and remittances. The new system of China must remain consistent with the existing policy framework. The study highlights the importance of modernization of retail payments,

which is key to boosting cross-border transactions and multilateral cooperation as well. The fifth chapter takes a close look on the hot topics of technology and infrastructure. First of all, Eng Chye Tan, President of the National University of Singapore (NUS), and his colleagues, Chye Kiang Heng, Ke Fan and John Chye Fung, lay down a conceptual framework to explain the mutually constructive relationships between smartness, city and health by studying four cases in high-density Asia – Shanghai, Kashiwa-no-ha, Songdo and Singapore. Urbanisation poses multiple challenges globally, such as pollution, urban congestion and poor sanitation, which may affect human health significantly, yet little is known about how smartness, city and health can be connected. The authors highlight that through a people-centric paradigm, smart city technologies improve the urban living experience; therefore, they are integral parts of the solution for urban problems. Smart technologies are related to a larger issue: the Fourth Industrial Revolution, which is examined by Glenn Diesen from a geo-economic perspective. He discusses how rapid technological changes undermine the foundations of the US-centric liberal international economic system. As a Professor at the University of South-Eastern Norway specializing in the political economy of Greater Eurasia, Diesen has a deep knowledge of the historic dynamics of technological competition and cooperation. His paper points to the fact that due to the widespread use of digital solutions, technological sovereignty becomes strongly interlinked with political sovereignty. As a result, states will increasingly adopt a swing power strategy to mitigate dependence in the digital realm. Technological cooperation and competition across Greater Eurasia are thus the manifestation of the emerging multipolar system based on a balance of dependence. Khee Giap Tan, Associate Professor at NUS Lee Kuan Yew School of Public Policy, discusses how technological innovation could exacerbate the problems already caused by globalization, such

as the widening income disparity and the worsening social division. The unequal distribution of the benefits of trade and investment and the lack of digital infrastructure for quick access to market information has led to an uneven playing field between multinational corporations and SMEs, while vital financial resources have been directed away from economic development and infrastructure upgrades as a result of the pandemic. The author stresses that – given the emerging market imperfections – coordinated efforts by governments are paramount for addressing these issues, such as supporting people in acquiring skills and knowledge to make the best use of the latest technology. Last, but not least, the sixth chapter elaborates on a topic that is becoming more and more important in the age of knowledgebased societies: education. The first paper is written by Levente Horváth and Kristóf Lehmann, both of whom have outstanding experience in managing central bank educational initiatives in Hungary, as Director of the Eurasia Center at John von Neumann University and Director for Training of Economic Sciences at the Magyar Nemzeti Bank, respectively. In their paper, they argue that modern-day economic development is closely linked to the creation of a knowledge-based society. Therefore, central banks also engage in a wide range of educational activities, also in cooperation with universities and think tanks. The authors first describe international examples for that, ranging from East Asia to the Middle East. Thereafter, they stress the role of the central bank of Hungary in the academic world, which has already produced tangible results for Eurasian cooperation, including the double degree programme of Fudan University in China and Corvinus University of Budapest in Hungary. In the last paper of the volume, Zongxian Feng, a prominent scholar at Xi’an Jiaotong University (the university having initiated the founding of the University Alliance of the Silk Road), sheds light on an interesting aspect of scientific and social development: the role of think tanks, including university-affiliated ones.

According to the paper, China has a long-standing tradition of relying on experts and facilitating the establishment of think tanks. Moreover, Chinese think tanks are gradually increasing their international impact and recognition. This development provides a solid foundation for cooperation with Europe and other parts of the world. One important platform for that cooperation is the University Alliance of the Silk Road, with 151 universities from 38 countries as its members. The author convincingly demonstrates that such academic exchanges not only promote mutual understanding, they also increase the international impact of think tanks in both China and Europe. We believe that even these short summaries demonstrate the rich and insightful content presented in the volume. We thus hope that all readers will find interesting and useful thoughts in these pages, supporting their research activities and deepening their knowledge of Eurasia. Have a good read!