HUG Magazine 2017 EN - Issue 3. (№7) by PAIGEO - Pallas Athene Innovation and Geopolitical Foundation

2017

HUNGARIAN GEOPOLITICS HUNGARIA N G EOPOLITICS

In the shifting world order, China’s long-term development concept, the reconstruction of the Silk Road, has become even more important with the rise of the East, and Hungary fulfils the role of a key region in this ambitious project. The cooperation of Central- Eastern European countries, especially the cooperation role of the V4 countries, and the international role of the 16+1, which is undoubtedly China’s most important success story in the region and Europe, have gained strength.

HUNGARIAN GEOPOLITICS

HUG 2017

2017 / III.

ISSN 2498-647X

16 + 1 COOPERATION THE BELT AND ROAD FORUM IN BEIJING IN 2017 SHANGHAI FORUM 2017 EUROPEAN FORUM OF THE ONE BELT, ONE ROAD COOPERATION CONFERENCE THE ECONOMIC GEOGRAPHY OF THE SILK ROAD THE FUTURES GEOGRAPHY OF THE SILK ROAD THE NEW SILK ROAD AND THE ANCIENT EURASIAN CIVILISATION

FOREWORD

Dear Readers, The One Belt, One Road issue of the HUG (Hungarian Geopolitics) Magazine was published a year ago, presenting the developments, discoveries and future visions related to the ancient and the modern Silk Road. In the shifting world order, China’s long-term development concept, the reconstruction of the Silk Road, has become even more important with the rise of the East, and Hungary fulfils the role of a key region in this ambitious project. The cooperation of Central and Eastern European countries, especially the cooperation role of the V4 countries, and the international role of the 16+1, which is undoubtedly China’s most important success story in the region and Europe, have gained strength. Chinese leadership announced the One Belt, One Road programme in 2013, which aims at strengthening the relationships between countries lying along the former Silk Road and expanding their trade by, among others, infrastructure developments. The Central and Eastern European region is a key point of the New Silk Road–the networks starting from China reach Europe here, thus the importance of the region also requires the coordination of all scientific cooperation related to the initiative. In addition to bilateral commercial cooperation, the cooperation is intended to be expanded in the field of finance as well. The Research Institute of the Pallas Athene Geopolitical Foundation (PAGEO), focussing on research into East Asia, joined as the 64th member the “16+1 Think-Tank” network consisting of Central and Eastern European research institutes and coordinated by the Chinese Academy of Social Sciences, and was granted the Euro-Sino Economic Research Award as a recognition of its scientific work in May 2017. In the meantime, the Belt & Road Centre, founded by Pallas Athene Geopolitical Institute, which coordinates the scientific activities–in connection with the One Belt, One Road programme–in the countries of the region and gathers and publishes the related researches and information, was established last November. The goal is to create such a professional network which gathers and organises the information available in the Central and Eastern European region, produces content and liaises with relevant professional institutions and universities of East Asia.

The timeliness of the present issue of HUG on the Silk Road is supported by the fact that Budapest will host the cooperation forum between China and Central and Eastern European countries (16+1) in November, 2017, the year in which Hungary holds presidency over the V4 countries.

The role of Central and Eastern Europe is given extra value, also on the side of One Belt, One Road. In particular, the role of Hungary and Poland is especially important. While Poland may possibly become the most important centre of logistics and infrastructure in the region, Hungary may become a major knowledge centre of the region, where the role of cultural, creative economic and new technological industries will be significant. Viewed from China, the Central and Eastern European region fulfils the role of a bridgehead-region between Europe and Asia. In the present issue of HUG, we can read about the major milestones and events of the last twelve months. As an outcome of the joint work of the colleagues and researchers of our professional collaboration partner, the Geo Centre (Institute of Economic Geography, Geoeconomy, Future Studies and Sustainable Development) of the Corvinus University of Budapest, a book entitled “The Economic Geography of the New Silk Road” has been published, and we are presenting some of the studies included therein, as well as the results of the infrastructural developments, the results of innovations and technological investments, and many other interesting professional studies. Simultaneously with the publication of our present issue, also a Chinese special edition of HUG has come out. Join us again in both space and time in this special professional journey.

Yours faithfully,

Norbert Csizmadia Pallas Athéné Geopolitical Foundation Chairman of the Board of Trustees HUG Editor-in-Chief 5

TABLE OF CONTENTS

104

Economic Geography of the New Silk Road Belt

An Introduction to the “16 + 1 Cooperation”

114

The New Silk Road as a Development Policy Factor

The Research Institute of PAGEO Has Become Part of the 16+1 Network

126

New Silk Road – Transport Connections

The Belt and Road Forum in Beijing in 2017

144

The Futures Geography of the New Silk Road

Shanghai Forum 2017

156

The New Silk Road and the Ancient Eurasian Civilisation

Can China Be the Winner of the Next Industrial Revolution?

Rail Freight Transport between China and the European Union on the New Silk Road

One Road, One Belt From Germany’s Perspective

The European Forum For Belt And Road Cooperation Conference

Euro-Sino Economic Research Award

PAGEO Doctrines

Geography, Economy, Strategy

102

Strategy and Geography in Understanding the New Silk Road

166

Book Recommendations

170

China's Asian Dream: Empire Building Along New Silk Road

174

Restless Continent: Wealth, Rivalry and Asia's New Geopolitics by Michael Wesley

179

This Brave New World – India, China, and the United States by Anja Manuel

186

Cracking the China Condrum by Yukon Huang

192

Easternisation. War and Peace in the Asia Century by Gideon Rachman

AN INTRODUCTION TO THE “16 + 1 COOPERATION”

AN INTRODUCTION TO THE “16 + 1 COOPERATION” Author: Viktor Eszterhai

“16+1 Cooperation” is a trans-regional platform created to intensify the relationship between China and 16 Central and Eastern European countries. The summit of Prime Ministers involved in the mechanism will be hosted by Hungary in November, 2017, therefore it is worth examining the history of the “16+1 Cooperation” and the peculiarities of its operations as well as the occurring problems and challenges.

ANTECEDENTS During his official visit to Hungary in 2011, Wen Jiabao, former Premier of the State Council of the People's Republic, declared China’s commitment to improve relationships with Central and Eastern European (CEE) countries, and also announced the establishment of a new mechanism for this purpose. A year later, the platform named “16+1 Cooperation” was formed by China and 16 CEE countries in Warsaw. The 16 CEE countries participating in the mechanism include: Albania, Bosnia Herzegovina, Croatia, Macedonia, Montenegro, Serbia, Slovenia, Bulgaria, Romania, the Czech Republic, Hungary, Slovakia, Poland, Latvia, Lithuania and Estonia. The “16+1 Cooperation” fits China’s attempts of recent years to establish new international institutions in order to increase its influence in global politics. Another important feature of the “16+1 Cooperation” is being part of “One Belt, One Road”, China’s ambitious foreign policy plan. HISTORY OF THE “16+1 COOPERATION” At the summit of the Prime Ministers of China and the CEE countries, held in Warsaw in 2012, the Member States of the mechanism adopted the “Twelve Measures”, which defined the main goals of the cooperation, with setting up a Secretariat subordinated to the Beijing-based Ministry of Foreign Affairs being the most important one. China

announced to create a $10 billion special credit facility, part of which can be drawn down in the form of preferential loans to implement joint projects, primarily in the field of infrastructure, green economy, etc. CEE countries can apply for project funding at Chinese financial institutions (National Development Bank of China, Export and Import Bank of China, Industrial and Commercial Bank of China, Construction Bank of China, Bank of China, China Citic Bank). The parties agreed to establish a development fund of $500 million, and the member states planned to increase trade between the region and China up to $100 bn by 2015. The agreements provided for further cooperation in the field of finance, tourism, culture and science, and China promised to grant scholarships for 5,000 students in the region in the next five years. As the most important outcome of the summit held in Bucharest in November, 2013, the parties laid down that the heads of government of the countries concerned would meet on an annual basis to overview the results of the cooperation and to define the direction of future progress. They also agreed to develop the medium-term programme of the “16+1 Cooperation”. Regarding economic cooperation, a decision was made on holding investors’ and scientific forums, and establishing the chamber of commerce of China and the CEE countries, which the member states can join on a voluntary basis. Several new forums were announced in the

field of science and education (China-CEEC highlevel symposium of think tanks, China-CEEC Young Political Leaders› Forum, China-CEEC Education Policy Dialogue, etc.), and preparing for establishing coordination centres in various fields was also agreed upon. Finally, Hungary, Serbia and China announced to jointly modernise the railway line between Budapest and Belgrade. At the summit in Belgrade in December, 2014 the parties declared to regard the principles of China 2020 Strategic Agenda for Cooperation and EU legislation as the foundation of the cooperation. The first large-scale infrastructure project of the “16+1 Cooperation”, i.e. the modernisation of the Budapest-Belgrade railway line, was signed. At the summit, the parties declared to support the establishment of the China-CEEC Business Council in Warsaw, which the regional economic organisations would join on a voluntary basis. a decision was made to form the first industrial coordination centres, the China-CEEC Tourism Promotion Agency in Budapest and the China-CEEC Investment Promotion Agency in Warsaw and Beijing. In the summit held in Suzhou in November, 2015 the institutional operations of the “16+1 Cooperation” was ultimately consolidated: the Chinese party and the international coordinators prepared the National Coordinators’ Meetings, during the summit the parties agreed on the place of the next

meeting, discussed the goals of the community and reviewed the implementation of earlier plans. The Suzhou Guidelines emphasised the further strengthening of the relationship between the “16+0 Cooperation” and the EU, identifying the China-EU Connectivity Platform in addition to earlier mentioned forms of cooperation. The fact that “16+1 Cooperation” is handled by the Chinese party as an integral part of the Government’s grandiose “One Belt, One Road” plan was confirmed, therefore the Memorandum of Understanding signed by Hungary and China was given special emphasis. In order to strengthen trade relationships, the parties acknowledged to develop the railway link between the two regions, following the example of the already working cargo railway transit between the cities of Łódź and Chengdu. The Cooperation in Facilitating Customs between Greece, Macedonia, Serbia and Hungary was launched in order to transport goods as smoothly as possible from Piraeus Port to the EU (China-Europe Land-Sea Express Line). The parties supported the plan ensuring the cooperation between the Adriatic, the Baltic and the Black Sea harbours and related industrial parks as well as their connection with economic corridors (Adriatic-Baltic- Black Sea Seaport Cooperation). The joint Medium-term Agenda of the platform was adopted, ultimately consolidating the fields of cooperation: economy; connectivity and infrastructure; industry and processing industry; agriculture and forestry; science, research

AN INTRODUCTION TO THE “16 + 1 COOPERATION”

and environmental protection; culture, education, youth exchange, sport and tourism; health, and finally local-level cooperation. The most important outcome of the meeting held in Riga in November, 2016 was the establishment of the China-CEEC Investment Cooperation Fund. The parties agreed to align their infrastructure development with the routes of the Trans-European Networks (TEN-T). The China-CEEC Secretariat on Logistics Cooperation was established in Riga, which received its own virtual platform (www. ceec-china-logistics.org). The parties support the modernisation of the Belgrade-Bar railway line, the second large-scale infrastructure project of the mechanism. CHARACTERISTICS OF THE “16+1 COOPERATION” The experiences of recent years have revealed that the “16+1 Cooperation” has many interesting characteristics, which distinguish it from other international institutions. The first important characteristic of the “16+1 Cooperation” is that it is operated according to a consciously loose institutional arrangement. Typically, each country decides to join the work of the mechanism’s organs on a voluntary basis. The mechanism has three levels: 1) forum of heads of states 2) a level related to expert discussions and major fields of cooperation (e.g. infrastructure development, agriculture) 3) and finally, the most important level is represented by a central organ, the Beijingbased Secretariat, continuously liaising with the embassies of the countries concerned (supervising the performance of initiatives and the fulfilment of commitments, summoning meetings, formulating topic proposals). This loose institutionalisation meets the interests and motivation of the participating countries and facilitates focussing on areas serving the improvement of cooperation. Furthermore, it is especially important that it makes the mechanism also more acceptable by the EU, diminishing critical voices according to which China aims at creating its own international institution within the EU. Interestingly, loose institutionalisation–although it is traditionally a characteristic of weak organisations–has an undoubted advantage under the rapidly changing global circumstances of the past decade: it makes the mechanism more flexible and result-oriented.

Another characteristic of the Cooperation is a conscious recognition of the heterogeneity of the participating countries. 11 of the 16 CEE countries are Member States of the European union (EU), while 12 of them are members of the NorthAtlantic Treaty Organisation (NATO). These 18 countries have very different geographies and histories; their only common historic feature is

“The experiences of recent years have revealed that the “16+1 Cooperation” has many interesting characteristics...” their former membership in the Socialist Bloc. The recognition of heterogeneity is an imperative for the feasibility of the “16+1 Cooperation”. The fact that it does not force compulsory homogeneity on its member states, however, somewhat increases its efficiency. It is beyond doubt, however, that in the future China–maintaining the present institutional frameworks–should further divide the sixteen countries into internal blocks (Baltic countries, West and East Balkan, Visegrad countries), for the sake of more effective operations. Third, “16+1 Cooperation” has become such a common regional forum that necessarily brought East-Central European countries closer to each other. As yet, this has not substantially decreased the traditionally Western European focus of the region, but, in the long term, is expected to contribute to the strengthening of a kind of regional identity. Considering the political processes within Europe, its significance in a longer term should not be underestimated. The fourth characteristic is the dominance of economy, although the Cooperation covers almost all areas of the relationships. The most important aspects of economic relationships are represented by the financial cooperation (preferential loans or investments) and infrastructure support (such as the Budapest-Belgrade railway line). Typically, the bodies and forums of the economic cooperation are

the most active and significant, such as the ChinaCentral and Eastern Europe Business Council and the China-Central and Eastern Europe Business Forum. The focus of the relationship on economic cooperation promotes the result-orientedness of the two organisations. The character of the “16+1 Cooperation” well reflects the pragmatic, less value-based feature of China’s foreign policy, which is also suitable to increase the acceptability of the mechanism within the EU. The fifth characteristic is the planned framework of the “16+1 Cooperation”, which was clear already at the time of foundation (e.g. Twelve Measures), but took an institutionalised form only after the summit held in Suzhou, completed by the mediumterm schedule of the mechanism. The typically result-oriented nature od the platform is further enhanced by setting the goals and monitoring progress. Sixth, the engine of the Cooperation is China, while the CEE countries are unable to adopt a unified stance. On the one hand, this asymmetry is most discernible in the creation and operation

of institutions. China consciously considers the interests of the countries taking a lesser part, but in practice there is strong competition between the states of the region for winning Chinese investments, which is not very likely to change in the near future. The seventh characteristic is that the “16+1 Cooperation” emphatically does not conflict with the European Union, but even “complies with its relevant laws and decrees”. The “16+1 Cooperation” must comply with the legislation and strategic documents of the European Union (China-EU 2020 Strategic Agenda for Cooperation). It is extremely important to emphasise this to prevent criticism against the mechanism. The 16+1 Cooperation”, however, is not entirely free from political purposes, and is more than merely an international economic institution. Finally, thanks to the “16+1 Cooperation”, the cooperation between CEE and China fits China’s other new mechanisms, coordinating the state-level relationships between Vhina and other regions (e.g. Chna-Africa Cooperation Forum), which refers

AN INTRODUCTION TO THE “16 + 1 COOPERATION”

to the fact that the Chinese government builds its transregional institutions according to a kind of pattern, providing a basis for the operations of “One Belt, One Road”. ASSESSMENT OF THE “16+1 COOPERATION” In some Chinese opinions, the “16+0 Cooperation” is one of the most important diplomatic outcomes of China’s policy on Europe, which may also serve as an example for other regions (or even the EU). Other experts highlight that the cooperation has produced significant results within a relatively short period of time, and has proceeded to the next phase of development: while priority was formerly given to creating the institutional frameworks, now giving them substance has become important. By contrast, some experts believe the feasibility of the cooperation is questionable, due to the different historical pasts and political situations of the sixteen countries. Undoubtedly, the goal set at the establishment of the mechanism, namely to increase the trade between China and the CEE region to $100 bn, has not been achieved: China’s export amounted to $42.2 million in 2015, -while its export form the 16 countries amounted to $14.1 million. The data reveal that trade is still strongly asymmetric, the attempts to make SMEs of CEE countries appear in the Chinese market have proven to be futile. Another disappointment, primarily for CEE countries, was that no surge of Chinese investments could be observed despite the “16+1Cooperation”. The lack of green field investments is an especially sore point, which are extremely popular tools of internal policies because of their job-creating capacity. Despite critical voices, however, the “16+1 Cooperation”, is still assessed predominantly positively by the governments of the CEE region, primarily owing to the “One Belt, One Road” project, which is optimistically considered a suitable tool for the region to break out from its semi-peripheric position within Europe through the expansion of trade. Actually, the greatest danger for the “16+1 Cooperation” is posed by the EU. Although the Cooperation is not a priority theme (in contrast with the issues of trade, investments and human rights, etc.) of the EU-China relationships, according to some

leading circles of the EU (and governments of its Member States, e.g. Germany) the region does not need a new channel outside the EU to manage relationships with China. This guideline applies to Member States as well as the five Balkan candidate countries. Within the EU, usually three concerns arise in connection with the “16+1 Cooperation”. According to the first concern, the joint projects within the framework of the mechanism – especially the infrastructure investments and their form of funding – are in conflict with the legislation of the EU. Those who take this viewpoint think that the projects re not transparent, violate the internal market regulation of the EU (public procurement, environmental impact study, technical standards, etc.). These are the reasons why the European Commission is examining the flagship project of the Cooperation, the modernisation of the BudapestBelgrade railway line. Second, critical voices claim, the mechanism does not meet European principles and values, and does not follow the model which is represented by the EU in the CEE region. Third, China is trying to drive a wedge within Europe and implement the “divide and rule” principle with the mechanism, critical voices warn. Some extremist views regard the “16+1+Cooperation” China’s Trojan horse. All these critical remarks – may they be exaggerated and partly stem from the preservation of the CEE market – should be kept in view to ensure the further development of the “18+1 Cooperation”. SUMMARY The “16+1 Cooperation” has undergone significant development, and become an operating transregional platform. The institution can be regarded such a flexible and pragmatic mechanism which, on the one hand, has substantially improved the relationship between China and the CEE region, and which, on the other hand, provides guidance to operate the relationships between China and other regions within the frameworks of “One Belt, One Road”. For all these reasons, it may serve as the model of cooperation between the EU and China in the long term, especially if the USA continues to move away from the EU. All this, however, is on condition that the “16+1 Cooperation” responds effectively to the countless challenges that it is facing,

THE RESEARCH INSTITUTE OF PAGEO HAS BECOME PART OF THE 16+1 NETWORK Author: Viktor Eszterhai

In March, 2017, the Pallas Athene Geopolitical Institute became the 64th member of the “16+1 Think Tanks Network” consisting of Central and Eastern European research institutes coordinated by the Chinese Academy of Social Sciences.

“The operations of more than sixty research institutes of European countries are coordinated by the Chinese Academy of Social Sciences.” Founded in 2015 on the initiative of China’s Ministry of Foreign Affairs as part of the “16+1 Cooperation” coordinating the relationships between China and sixteen Central and Eastern European countries, the China-CEEC Think Tanks Network” (abbreviated as the “16+1 Think Tanks Network”) is an international scientific network with the aim to establish high-level cooperation and an information system between the institutions of the countries involved. The operations of more than sixty research institutes of European countries are coordinated by the Chinese Academy of Social Sciences. The “16+1 Think Tanks Network” provides an institutional basis for joint research activities and the exchange of researchers. At round-table discussions, seminars and annual summits, issues of economy, finance, education, culture and investment are discussed in order to support the development of the relationship between China and the Central and Eastern European region as well as the European Union. Within the framework of the current coordination, Pallas Athene geopolitical Institute has an opportunity to liaise with regional as well as Chinese institutions, and initiate joint researches on an international level. By representing Hungary, it may contribute to promoting the foreign policy interests of the country and the region. Home page: http://16plus1-thinktank.com/

THE BELT AND ROAD FORUM IN BEIJING IN 2017

mostly results achieved between China and other countries, such as aligning the infrastructure plans of Laos, Cambodia and Hungary with the Chinese agenda. President Xi attaches a significant role to railways and roads in creating prosperity, and he mentioned the Budapest-Belgrade railway line among the positive examples given. The free trade agreement with Georgia, energy deals with Saudi Arabia, Azerbaijan, and Russia, as well as other bilateral arrangements can be regarded as achievements of the Forum.

Author: Anton Bendarzsevszkij, Péter Klemensits, Eszter Polyák, Alexandra Zoltai

The first “Belt and Road Forum for International Cooperation”, which served as a summit of the members of China’s One Belt, One Road geopolitical initiative, was held on 14th and 15th May, 2017. Several Southeast Asian, Central Asian and European countries were represented in the Forum, the most important outcomes of which were bilateral agreements concluded at the event. Some of the significant powers were guests of honour, while others were absent, and their diverging viewpoints are also included in this summary.

In addition to economic relationships, the Chinese President also highlighted the strengthening of

The closing document of the Forum is a joint communique that champions globalisation and free

relationships between peoples, which mainly applies to developing the social aspects of the “Belt and Road”, and is manifested in the growing number of exchanges in the field of education, science and culture. President Xi conceives the future along the following principles: he wants to make the new Silk Road a road into peace, prosperity, opening, innovation and connecting civilisations.

trade, and opposes all forms of protectionism in line with the WTO’s rules on the multilateral trading system. In the field of environmental protection, the Paris Agreement and the UN Agenda 2030 for Sustainable Development are adopted as guidelines. In addition, the document includes an intention to make the initiative available also for Africa and South America.

The Chinese government organised the first “Belt and Road Forum“ on 14th and 15th May, 2017. The two-day event focussed on the concepts encompassing the country’s foreign policy attempts. The representatives of participating countries, some 57 states, take part as partners in the development and implementation of the projects of the Belt, divided into six major economic corridors, and those of the Road, connecting maritime routes. In China, the Forum was considered the highest-profile diplomatic event of the year, which was primarily a large-scale international celebration of the Chinese initiative, and, apart from the pledge to further boost funding, provided little new information during the history of the initiative.

Although it was a multilateral meeting, bilateral agreements, concluded either before or at the event, have a prominent role. The successful examples mentioned in President Xi’s speech are

SPEECH BY PRESIDENT XI resident Xi Jinping delivered both the opening and closing remarks, as the idea and launch of the “Belt and Road” concept is primarily related to the Chinese leader. He evoked the history of the ancient Silk Road, highlighting the characteristics that determine both the ancient and the renewing routes, such as peace and cooperation, openness and inclusiveness, mutual learning and

mutual benefit. The President evaluated the four years that had passed since the announcement as productive, which he demonstrated by referring to the support of international organisations including the UN and more than a hundred countries The primary pursuit of the initiative, President Xi highlighted, was to leverage the comparative strengths of the various countries, and to link with existing economic plans, such as the concepts of the Eurasian Economic Union, the ASEAN, Turkey, Mongolia and other countries. A new Belt and Road cooperation on trade connectivity with some 60 countries and international organisations is expected to be announced in the near future. The President said that total trade between China and other Belt and Road countries in 20142016 had exceeded US$3 trillion, which, to a great extent, was due to increased connectivity and the economic processes simplifying and accelerating in the wake of agreements. In addition, President Xi announced to raise the capital of several financial organisations related to the initiative, contributing an additional RMB 100 billion (almost $15 billion) to the Silk Road Fund, and also the China Development Bank will be able to lend RMB 250 (some $36 billion) more.

• The first Belt and Road Forum was held in Beijing, which served as a discussion summit of the member countries of One Belt, One Road. • At the multilateral meeting, several bilateral agreements were concluded, primarily these can be regraded the achievements of the Forum. •In his speech, President Xi Jinping referred to their intention to build the New Silk Road a “road into peace, prosperity, opening, innovations connecting different civilizations”. • In his speech delivered at the Forum in Beijing, Russian head of state, Vladimir Putin focussed on a larger Eurasian cooperation. According to Russia’s President, the potential of the integration projects should be combined. • Russia and China agreed to set up a joint investment fund of $15 billion to promote regional investments. • Kazakhstan, Belarus and Central Asian countries were important guests of the summit in Beijing,

China did not close the Forum with success in all regards, since several Member States of the European Union declined to sign a document of a trade statement as, in their opinions, China had failed to include commitments to sufficient

and conducted negotiations with China on trade and infrastructure agreements. • Secretary-General of the Liberal Democratic Party Toshihiro Nikai of Japan conveyed Prime Minister Abe Shinzo’s message according to which the country could see an opportunity to join AIIB. • Most Southeast Asian countries had the highestlevel representation at the Forum, signing several economic agreements with China. • India’s absence was due to its criticisms of the China-Pakistan Economic Corridor; furthermore, the Indian government does not want to participate in the Chinese initiative for geopolitical reasons, either. • Most of the European countries attending the Forum welcomed the new initiative positively and with high hopes. • In relation to the New Silk Road, Germany, however, wants more guarantees from Beijing on, among others, free trade and environmental protection.

THE BELT AND ROAD FORUM IN BEIJING IN 2017

transparency in trade and project tendering processes, and also the basic principles of environmental protection are compromised by disregarding the applicable rules. JAPAN’S PARTICIPATION On behalf of Japan, Secretary-General of the Liberal Democratic Party Toshihiro Nikai attended the meeting. Nikai presented a letter from Japanese Prime Minister Abe to President Xi, signalling that joining the China-backed Asian Infrastructure Investment Bank (AIIB) could be an option for Tokyo if governance questions were resolved. This step was triggered by the growing distance between Japan and its old ally under the current US presidency, and Japan is forced to make compromises with its rival in the region.

Indonesia has been a committed supporter of the Maritime Silk Road from the beginnings, since China definitely supports the infrastructure developments scheduled by President Joko Widodo (Jokowi). The country was represented at the Forum by President Jokowi himself, the parties signed a series of cooperation documents during bilateral meetings to enhance their strategic partnership, including an agreement to build an economic connectivity corridor.

SOUTHEAST ASIAN PARTICIPANTS The Southeast Asian region plays a key role in the One Belt, One Road project, with special regard to the 21th Century Maritime Silk Road. ASEAN countries have a stake in close cooperation with China, therefore most countries were represented by their heads of state or government.

Malaysia’s prime Minister Najib Tun Razak also attended the event, which was hailed very fruitful for Malaysia, as Memorandums of Understandings (MOUs) worth up to over $7 billion were signed between China and Malaysia, mainly

concerning infrastructure developments and agricultural. Chinese investment will contribute to the growth of the Malaysian economy; therefore, Kuala Lumpur is considered a major ally of China in the OBOR project. President of the Philippines Rodrigo Duterte arrived in Beijing to engage his country in even closer cooperation with China after his negotiations with Xi Jinping in October, 2016. During negotiations, several economic and energy agreements were signed. Duterte stood up for increasing Chinese investments and the infrastructure projects planned in the south of Malaysia, which may also contribute to the resolution of the Moro conflict,

role in the New Silk Road – witnessed the signing of 9 documents related to economy and finance, health, hydropower and education.

enabling peaceful development as well as effective connectivity to remote markets through the new Maritime Silk Road.

country was represented at the Forum by National Development Minister Lawrence Wong – , however, indicates the city state’s attempts to have greater independence from its neighbours in shaping bilateral relationships, although it is seeking cooperation with China. On behalf of Brunei, the Second Minister of Foreign Affairs and Trade attended the meeting, who negotiated on the expected role of the sultanate in the 21th Century Maritime Silk Road.

Vietnam’s President Tran Dai Quang’s visit also served to strengthen the relationships between China and Vietnam. China has been the largest trade partner of Vietnam for years, thus Hanoi expects the expansion of trade opportunities from joining the One Belt, One Road project, while also aligning it with Vietnam's Two Corridors and One Circle plan. Myanmar was given a significant role in China’s concepts, thus Beijing lauded the participation of State Counsellor Aung San Suu Kyi. During the Myanmar-China bilateral discussions 5 Memorandums of Understanding were also signed, which require a closer cooperation from the parties in economic development, health, and the preservation of historic monuments. From the viewpoint of Myanmar’s economy, Chinese investments are crucial, which was obviously proven by Suu Kyi’s visit. Two smaller states of the region, Cambodia and Laos, were also represented by Prime Minister Hun Sen and President Bounnhang Vorachit respectively. Phnom Penh is regarded as a natural ally of China in the region, and, in addition to strengthening their partnership, both parties agreed that the South-China Sea issue should be solved through a dialogue by the countries directly involved. The expectation that bilateral trade between Cambodia and China should reach $6 billion by 2020 also reflects strengthened economic relationships. At their meeting, the Presidents of Laos and Chinaafter having agreed on Vientiane’s expected

Although Thailand was not represented on the highest level, a delegation including 5 ministers were absolutely supportive of the Chinese plans. Thailand wants to join the China-Indochina Economic Corridor by building the Eastern Economic Corridor and its ultimate aim is to ensure the connectivity of China and Southeast Asia with the help of OBOR. The absence of the Prime Minister of Singapore – the

INDIA'S ABSENCE The countries of South Asia – with the exception of India – expect significant results from participation in the project, therefore they attended the Forum, too. The China-Pakistan Economic Corridor, worth $46 billion, is one of the flagship investments of the One Belt, One Road initiative. Pakistan’s delegation, led by Prime Minister Nawaz Sharif, signed several pacts in Beijing, including one for building an airport at the strategically important city of Gwadar. Sri Lanka’s Prime Minister Ranil Wickremesinghe also attended the multilateral discussions, although he does not intend to commit his country to China, as opposed to the former government, and also backed India’s concerns. Nepali Deputy Prime Minister Krishna Bahadur Mahara lauded the Chinese plans, and prior to the Forum, the two countries had signed a Memorandum of Understanding on infrastructure development to be built in Nepal by China. Contrary to its prior announcements, India eventually skipped the Forum. For its geopolitical interests, it does not support OBOR, either. The

THE BELT AND ROAD FORUM IN BEIJING IN 2017

China-Pakistan Economic Corridor is planned to go through Pakistan- occupied Kashmir, also claimed by India, and the Modi government believes that it ignores “India’s sovereignty and territorial integrity”. In addition, India claims, the Chinese projects lack transparency, environmental protection and preservation standards, and the long-term running and maintenance of the assets created are not guaranteed, either. Due to Chinese loans, the indebtedness of the participating countries is also a serious threat, and here the case of Sri Lanka, which has become unable to repay its debts of $8 billion, offers an instructive lesson. RUSSIA’S INVOLVEMENT At the Beijing summit Russia was represented by its head of state, Vladimir Putin, who apparently was one of Xi Jinping’s distinguished guests. Putin had a separate meeting with the leader of the Chinese state, and reciprocated the invitation: he will welcome Xi Jinping in Moscow in early July, 2017. In his speech delivered at the Forum, Vladimir Putin focussed on a larger Eurasia partnership. The potential of all the integration formats must be added together and bring vitality to “the huge Eurasian continent”, the Russian President believes. This way the cooperation of the Moscowled Eurasian Economic Union, Beijing-led One Belt, One Road, the joint Chinese-Russian project, the Shanghai Cooperation Organisation (SCO) and the Association of Southeast Asian Nations (ASEAN) would be ensured. Vladimir Putin would welcome the involvement of European countries in this Eurasian partnership project, which would create a common cooperation framework from the Atlantic to the Pacific. In his speech in Beijing, Putin also hid criticism directed towards the United States: “Protectionism is becoming a common practice that manifests itself in unilateral illegitimate restrictions, including how technology is supplied and distributed. The ideas of openness, freedom of trade are often rejected even by those who supported them so vigorously in the past.” In his speech, Putin laid great emphasis on infrastructure. He talked about the opportunities presented by the Northeast Passage, the

the European Union. He emphasizes, however, that they want to maintain a close and open trading partnership with their European neighbours, but at the same time, it is their ambition to secure free trade agreements around the world with new partners and old allies alike. Their ambition is for more trade, not less.

development of Eurasian roads and the modernisation of the Trans-Siberian Railway, which, Rus-

Hungary, Italy, Poland, Serbia, Spain and Switzerland had highest-level representation at the Fo-

sia’s President believes, can completely reconfigure transportation on the Eurasian continent. Putin stressed that in his opinion China’s One Belt, One Road brings stability to the world economy, considering current geopolitical trends.

rum; the United Kingdom, Germany and Romania were represented by Ministers, and France by its former Prime Minister.

The Forum in Beijing resulted in an important outcome for Russia: the two countries agreed to set up a joint investment fund to promote regional investments. China will allocate 100 billion yuan – approximately $14 billion – to this fund. This amount will be used to develop the cooperation between the Russian Far East and the Northern provinces of China. Apart from Russia, most post-Soviet states in the region also attended the summit in Beijing. Kazakhstan had high hopes about the meeting regarding infrastructure development and Chinese investments. Kyrgyzstan and Uzbekistan had negotiations on the China- Kyrgyzstan- Uzbekistan Railway Line, a project predating the One Belt, One Road initiative but sitting idle for years. China signed a free trade agreement with Georgia, and Azerbaijan reached an energy agreement with Beijing. Ukraine, Turkmenistan and Tajikistan, however, did not attend the Forum on the highest level.

The two leading economies of the EU, Germany and France, as well as the United Kingdom as already a non-EU country also attended the meeting. Former Prime Minister Jean-Pierre Raffarin said, France and China had the same visions of the future, both countries want a peaceful world in order to have peaceful development. Raffarin thinks that the great challenge for win-win international development is the struggle against protectionism and excessive nationalism, and, he claims, instead of closing down borders, we must carry out a win-win cooperation and promote peace through development in the world. Germany was represented by Economy Minister Brigitte Zypries, who warned on the very first day of the Forum that Germany and other EU countries would not sign a joint trade statement unless they received more guarantees from Beijing on free trade, environmental protection and working conditions. Germany does want to take part, but tenders need to be open to everyone; only then will German companies take part, she said. It must also be clear what is actually going to be built, because at this point, it is not clear.

EUROPEAN PARTICIPANTS Most European countries were represented at the Forum, as both the maritime and land component of the One Belt, One Road project will meet in Europe, therefore the new Silk Road is planned to stretch across the majority of the countries on the continent. The Czech Republic, Greece,

It is British Chancellor of the Exchequer Philip Hammond’s belief that Britain, lying at the Western end of the Belt and Road, is a natural partner in this endeavour. For centuries, Britain has been one of the strongest advocates of an open global trading system. Now they embark on a new chapter in their history, as they are leaving

Three European countries struggling with economic difficulties (Spain, Italy and Greece) also attended the Forum. For them, the initiative can provide great help and an economic boost. Spanish Prime Minister Mariano Rajoy highlighted the rise of the Spanish economy, as they managed to cope with a decline lasting for five years, and this can be greatly contributed to the export of the country. Furthermore, the head of government added, he appreciated the One Belt, One Road initiative and Spain is ready to strengthen its relationships with China in the fields of economy, investment and infrastructure, and deepen the European-Chinese relationships. Greek Prime Minister Alexis Tsipras believes that the expansion of trade and investments may have a key role in the economic growth of nations. Therefore, they will actively support that the initiative pays due attention to strengthening scientific and technological innovation, as well as integrating small and medium-sized enterprises in global value chains. Then he added that his country, due to its location, is looking for new maritime trade routes, and sees great opportunities in the 21 st Century Maritime Silk Road. Italian Prime Minister Paolo Gentiloni congratulated on the initiative and sees great potential in it. In his opinion, the Forum sent a positive message on promoting an open international economy and trade. He added that Italy attaches great importance to having good relations with China, and stands ready to keep high-level exchanges in such fields as economy, technology, agriculture, health care, education, tourism and small and medium enterprises, and commits to promoting the development of EU-China relations. The five European countries of the “16+1 Cooperation” also participated in the Chinese event. This Cooperation was established in 2012 with the aim of coordinating and institutionalising the

relationships between China and sixteen Central and Eastern European countries. The three countries playing key roles in the region (Poland, Hungary and Serbia) had the highest-level representation in the event. In his speech opening the two-day Belt and Road Forum, Chinese President Xi Jinping listed Poland as an example of a successful economic initiative. China expects Poland to have a strategic role, by, among others, the railway connection between Łódź and Chengdu, which is currently a part of the New Silk Road. Prime Minister Beata Szydło believes that this cooperation will determine the conditions for development in the region in the coming decades. Then she pointed out that Poland finds it the most important to translate the cooperation into specific development projects. Hungary’s Prime Minister Viktor Orbán believes that “the East has caught up with the West”, and the old model for globalisation has become obsolete. The head of government pointed out that great changes have taken place in recent decades: the engine room of the global economy is no longer in the West, and “nowadays in fact the largest amounts of money are accumulating in Asia”, which then flow back from there towards the West, he explained. China also assigns a key role to Hungary in the initiative, since goods can reach our country from Piraeus Port, of which

“Hungary’s Prime Minister Viktor Orbán believes that the East has caught up with the West” the majority shareholder is China, through Macedonia and Serbia by rail – and from here, can be transported to the most important economic hubs of Europe. The Budapest-Belgrade railway line will be one of the most important elements of this phase, the modernisation of which was agreed upon at the already mentioned “16+1 Cooperation” summit in Bucharest in 2014. Serbian Prime Minister Aleksandar Vučić noted that many things had been done and a lot was still ahead, and One Belt, One Road held a lot of opportunities for them. Then he added that the list of benefits from the initiative was very long and would get longer in the future because Serbia’s government always expects to do something more for their country but they can't do it without China. In his opinion, the best words to describe this cooperation were links and being connected. Then he offered the next summit to take place in Serbia, although Serbia was one of the smallest countries that participated.

SHANGHAI FORUM 2017 THE RELATIONSHIP BETWEEN HUNGARY AND THE “ONE BELT, ONE ROAD” INITIATIVE

SHANGHAI FORUM 2017 Keynote speech delivered by György Matolcsy, Governor of the Central Bank of Hungary at the Shanghai Forum on 27th May, 2017

financial crisis. Although the two countries had had similar roots and characteristics before the crisis, the crisis management solutions that they chose and their results were completely different. In Hungary, the political turnaround of 2010, and the change of political leadership was a substantial prerequisite. In the period from 2003 to 2008, Greece and Hungary were both characterised by similar macro-economic figures. In addition to a significant government debt, amounting to

“…the routes of the One Belt, One Road initiative create new bridges…”

Routes of the New Silk Road

Your Excellences, Ladies and Gentlemen, Dear Colleagues and Friends, Thank you very much for the invitation and I am very pleased to be with you today. I think that the One Belt, One Road initiative is the most promising endeavour to re-unite and revitalise the global economy. In my opinion China’s One Belt, One Road is a very fair initiative, the implementation of which would create not only new economic cooperation between continents, but also new bridges would be built between Asia and Europe, including the European Union. When we think of the One Belt, One Road initiative, we must also remember the ancient Silk Road: this is one of the most important trade routes, which enabled the exchange of goods, information and technologies for a long time. The new Silk Road is going to be built on the ancient Silk Road, and is of key importance from the viewpoint of both Europe’s long-term competitiveness and Hungary’s economic convergence. We can see that the entire network of the New Silk Road starts in China and runs towards Europe. Once again, I would like to emphasise that the routes of the One Belt, One Road initiative create new bridges, and the European Union urgently needs these new connections to make the European Dream prosper. Regarding China, it is not completely clear for me whether China will have the leading role in the fourth industrial revolution. China’s great strategy, the socalled “Made in China 2025” enables the Chinese economy to become the winner of the New Machine Age of the 21st century, and this strategy is also closely related to the goals of the One Belt, One

Road initiative. The “Made in China 2025” plan has set nine strategic tasks. Of the nine goals, I would like to highlight improving manufacturing innovation and promoting service-oriented manufacturing, as well as emphasising quality over quantity and fostering Chinese brands. Several routes between China and Europe will be created as part of the new Silk Road, which will also mark a milestone for China to implement the strategic goals of “Made in China 2025” and to make the Chinese economy continuously flourish. I think that we will need a lot of routes to build bridges between Europe and Asia, the European Union and China, and Hungary and China.

“I think that the One Belt, One Road initiative is the most promising endeavour to re-unite and revitalise the global economy.”

Source: Pallas Athene Geopolitical Foundation and MNB

“The Made in China 2025” Strategy and its strategic tasks

Hungary, however, is a small country in the European Union, and a less significant player of world economy. Since 2010, our country has been combatting to cope with the aftermath of the global financial and economic crisis, and this combat has proven to be successful. It is worth comparing the most recent economic developments of Hungary and Greece, as these two countries were most severely stricken by the

SHANGHAI FORUM 2017

„Several routes between China and Europe will be created as part of the new Silk Road, which will also mark a milestone for China to implement the strategic goals of »Made in China 2025« and to make the Chinese economy continuously flourish.” 7-8 per cent of the GDP in both countries, the current account deficit was also too high. The share of working-age population and the rate of employment, however, remained low – especially in Hungary – , while GDP growth (approximately 3 per cent in the period from 2003 to 2088) was driven by foreign debts. In this period, the gross government debt-to-GDP ratio increased by 14

percentage points in Hungary and by 8 percentage points in Greece. Both countries were fragile, and reacted to the looming crisis particularly sensitively. Consequently, in 2007 and 2008 (well before the crisis), the growth rate of the Hungarian economy dropped below 1 per cent, while Greece was also facing several economic challenges.

Top 50 Hungarian reforms and innovations

Greece, Portugal, Spain and Italy were compelled to crisis management strategies based on traditional austerity measures. Let’s have a look at Greece, since this country has become the symbol of an unsustainable economic model and an unsuccessful crisis management approach. The Greek crisis management measures were based on the typical austerity philosophy preferred by international institutions. This model has failed. These austerity measures have weakened both the economy and the budget, caused a political turmoil, weakened and or/overthrew governments, slowing down or halting reforms. If we take a look at the current macro data of the Greek economy, we can see this failure. In Hungary, we adopted a different solution: an unusual way of crisis management. Our country chose such an unorthodox crisis management approach, which prompted heavy criticism from the circles of our friends within the European Union and several international economic organisations.

Average macro-economic performance of Greece and Hungary from 2003 to 2008

We launched structural reforms promoting growth, and we asked our business community to have a greater share of burdens, in order to make the Hungarian crisis management a success story. As part of the measures extending burden sharing, Hungary was the first in the European Union to levy tax on banks and other sector-specific surtaxes. At the same time, we introduced a completely new, flat-rate personal income tax system as well,

“We launched growth-stimulating structural reforms, and we asked our business community to have a greater share of burdens, in order to make the Hungarian crisis management a success story.” 30

with the aim of generally decreasing tax burdens, especially those of families. After 2010, moving from taxing work towards taxing consumption has become one of the budget priorities of the government, with the aim to boost labour supply, employment and economic growth. Economic reforms also affected other fields. On the one hand, the government renewed the Fiscal Council. On the other hand, the Hungarian government, together with the central Bank of Hungary (Magyar Nemzeti Bank, MNB) successfully resolved the foreign currency loan problem of the households sector, which endangered the homes of several hundreds of thousands of citizens. The government took several measures to avert this danger: it announced a moratorium on evictions, introduced early repayment and an exchange rate cap, set up the Hungarian National Asset Management Inc., and finally the Curia (the Supreme Court) delivered a decision to convert foreign currency denominated loans into forints, and the Central Bank of Hungary provided the foreign currency required for the conversion. Due to the measures, the foreign currency-based debts of households decreased,

SHANGHAI FORUM 2017

The Hungarian and the Greek way of crisis management

AUSTERITY

STRUCTURAL REFORMS

GREECE

HUNGARY

Increasing taxes • Income tax rate increase • Property tax • VAT rate increase on new house

Tax reform • Income tax rate decrease • Increase of consumption taxes and sectoral taxes

Decreasing expenditures • Decrease of pensions • Lay-off of public admin • Reduction of public wages

Reform of expenditures • Keeping real value of pensions • Tightening of early retirement • Public work scheme

Other steps • Reduction in minimal wage • Privatization

Other steps • Minimal wage increase • Expansion of state property • New measures to address demographic challenges Source: MNB

Average tax burdens in Hungary and Greece on one-earner married couples with two children earning 100% average wage

which contributed to the fiscal stability and also stimulated GDP growth. Please let me introduce you the Hungarian economic model in more detail. Since 2010, the main goal of the Hungarian economic policy is to achieve and preserve the macrofinancial equilibrium (budget and external account balance). Of our operative goals and main instruments, I would like to highlight the sustainable reduction of the government debt ratio and the introduction of a flat-rate personal income tax system.

Within the European Union, corporate income tax is the lowest in Hungary, with a current rate of 9 per cent. In order to maintain budgetary stability, the rate of consumer tax was raised in the meantime. The Hungarian government was characterised by a strict budgetary discipline, and therefore was able to decrease the government debt-to-GDP ratio. In addition, crisis management was implemented without the safety net of IMF, and the financial aid of IMF, which was required in 2008, has been successfully repaid since.

And now let’s move on to the most important structural reforms and innovations that are applied by the Hungarian government and the Central Bank of Hungary for budget stabilisation, a turnaround in monetary policy and the re-start of growth. In my opinion, these measures and instruments can be regarded as a completely new economic model. Economic recovery was facilitated by a comprehensive tax reform. The government introduced a flat-rate personal income tax rate of 16 per cent in 2016 (the 16 per cent was reduced to 15 per cent in 2016), and cut the corporate income taxes of small and medium-sized enterprises first, and of all enterprises later.

The introduction and gradual expansion of the family tax allowance, and the implementation of the Action Plan for Workplace Protection have increased the employment of target groups that have less developed relationships with the labour market. The Public Works Scheme has provided daily work opportunities for several formerly inactive people. Due to these measures, the employment rate has increased significantly. Opening to the East has also been an important reform measure in Hungary’s foreign trade and foreign policy strategy, which created sufficient conditions for the New Silk Road initiative.

SHANGHAI FORUM 2017

Differences of traditional and Hungarian crisis management

Source: MNB

The Central Bank of Hungary – in line with its primary aim and in response to the declining inflation forecast – has cut the base rate from 7 per cent to 0.9 per cent since 2012. While achieving price stability, the Central Bank of Hungary introduced a targeted instrument of monetary policy, the so-called Funding for Growth Scheme, which provides resources to support Hungarian small and medium-sized enterprises on favourable terms. Let’s have a look at the story of Hungary and that of Greece also from a different viewpoint, and let’s examine also the details. Hungary and Greece were in similar situations before the crisis, as both countries had to face almost identical macroeconomic problems. Innovation and competitiveness deteriorated significantly both in Hungary and Greece. Economic growth was covered from external debts in both countries, resulting in high levels of deficit and government debt in both states. In Hungary, however, growth-stimulating structural reforms were successfully launched after 2010. We devised our economic policy independently, which has eventually proven to be a basic element of success. The Hungarian government

introduced a comprehensive tax reform, but also the reform of the expenditure side is indispensable for stimulating participation in the labour market and preserving the real value of pensions. The restrictions of early retirement rules also formed a part of these reforms. We took other measures as well: we increased the minimum wage, expanded state-owned assets, and adopted measures to address demographic challenges, which collectively resulted in a more sustainable economic convergence in Hungary Greece, however, is a completely different story. The Greek government increased personal income tax, the VAT of newly built houses and wealth tax. At the same time, expenditures were reduced by cutting pensions, laying off public administration employees, and cutting the salaries of public service employees. In addition, as part of the Greek crisis management, the Greek government cut the minimum wage and privatised several state properties. Tax burdens, which had already been high prior to the crisis, were not reduced to such an extent as they were in Hungary. The Greek government merely introduced austerity measures, decreasing the total economic demand, and ruled out the possibility of any countercyclical economic policy measures.

As I have mentioned earlier, Hungary reduced tax burdens with a flat-rate income tax of 16 per cent (later 15 per cent), and exerted a positive fiscal effect on the economy, which could improve employment and drive economic growth. I would like to emphasise again that Greece is not the only country that has to tackle economic problems. The failed crisis management of the Eurozone and the official economic policy approach of the European Union have not really helped the Member States to overcome the crisis. Hungary repaid the IMF loans ahead of schedule, while Greece took out newer loans from 2010 to 2016. In addition, the government debt ratio has been continuously decreasing in Hungary since 2011, while in Greece the debt-to-GDP ratio has further increased. In Hungary, the employment-stimulating measures reduced the unemployment rate below 5 per cent in 2017, but in the case of Greece the unemployment rate is still 23 per cent. Greece has been caught in a vicious circle, while Hungary could break out after hitting rock bottom. All in all, Greece resorted to significant austerity measures, while in Hungary the macrofinancial balance and economic growth were promoted by structural reforms. The two types of crisis management

(the untraditional, growth-stimulating Hungarian one, and the traditional, austerity-based Greek one) have produced completely different results, although the starting position was similar in both countries. Traditional crisis management resulted in a debt spiral in Greece by austerity measures, slower growth, decreasing incomes and a deteriorating budgetary balance. By contrast, the untraditional Hungarian way of crisis management was based on reforms, therefore ensured a stable budgetary balance, stimulated the activity of the workforce, and thereby economic growth. The difference between the economic performance of the two countries can be clearly seen, which means that similar starting positions can lead to different results, depending on the measures applied. To sum up, we can say that Hungary is an excellent example that any Member State of the European Union can break out form the trap of the economic crisis as long as appropriate policies are combined. If we build bridges between Asia and Europe, the European Union will ardently need the implementation of effective economic policies to be able to take advantage of the opportunities of One Belt, One Road. Thank you very much for your attention.

COULD CHINA BE THE WINNER OF THE NEXT INDUSTRIAL REVOLUTION?

Author: Lilla Sarolta Balogh

This paper intends to give a comprehensive picture of China’s current situation and prospects for growth in the next industrial revolution, with special regard to the question whether the country could emerge as one of the “global winners” of the imminent transformation. By providing an overview of relevant literature, we examine the dominant trends behind the so-called Fourth Industrial Revolution and present the most important socioeconomic implications affecting China. Then we proceed with an analysis of China’s current economic situation and opportunities for growth, using secondary data. After having found that ensuring a positive grow path requires increased productivity via innovation, we evaluate the innovative capacities of Chinese industry. We conclude that China is already a world leader in various industries in terms of consumer-focused, efficiency-driven innovations, and while Chinese players have not achieved global competitiveness yet in technology- and science-based industries, if the country can follow its current path of development in promoting R&D and no major systemic disturbances occur, it is only a matter of time before Chinese players also emerge as market leaders in high-tech sectors on a global level.

INTRODUCTION China has come to a crossroads, but this time it is not about recognizing the right or the wrong path, but rather about connecting the potential directions of the coming industrial revolution. We are witnessing the dawn of such a new era that will bring about fundamental changes in the ways we live, work and progress together as a society, and individuals, communities and nations who are able to embrace these upcoming changes will be the ones to prosper, as has been the case throughout history. The technological revolution is accompanied by a range of broader socioeconomic, geopolitical and demographic processes, impacting all regions of the world and all aspects of our lives. China has already been touched by the winds of change,

and now, after decades of unparalleled economic progress and social development, entered a phase of transformation full of challenges with weakening prospects of future growth. This paper intends to assess whether China can position itself in this global transformation, drawing on its unique economic and social characteristics, to emerge as one of the winners of the next industrial revolution. We begin our analysis with an overview of the main trends of the next industrial revolution, to project the scale and the likely impacts of the upcoming transformation. In addition, we present the most important socioeconomic implications of the fourth industrial revolution, with special emphasis on megatrends directly influencing China; we

explore China’s current economic situation and give a short overview of some of the underlying factors of the recent economic slowdown, with a special focus on the declining contribution of multifactor productivity to GDP growth.

“We are witnessing the dawn of such a new era that will bring about fundamental changes in the ways we live, work and progress together as a society...” WHAT WE MEAN BY HE NEXT OR FOURTH INDUSTRIAL REVOLUTION? The term ‘fourth industrial revolution’ became widely known at the Hannover Fair in 2011, referring to the Industry 4.0 or Industrie 4.0 strategic

initiative of the German government as part of the country’s High-Tech Strategy 2020, the purpose of which is to establish the country as an as an integrated industry lead market and provider. The Industry 4.0 programme outlines a plan to redesign the processes of manufacturing and production, moving from a centralised model to decentralisation, where ICT-based systems and networks could independently exchange information (M2M) to manage production processes optimally. According to one of the policies issued by the European Commission (EC), the term Fourth Industrial Revolution refers to technologies and concepts of value chain organisation, along which the EC is setting a path to digitise European industry. As Günther H. Oettinger, Commissioner for the Digital Economy and Society, said, “Digital is transforming European industry. It’s changing the way we produce cars or chemicals, and how banks deliver financial services. Our challenge is to turn the 4th Industrial revolution to our advantage, to reap the opportunities it brings.” In a broader context, the Industry 4.0 programme also has implications for the competitiveness of the economy and nations in general, as it is based on maintaining technological leadership

COULD CHINA BE THE WINNER OF THE NEXT INDUSTRIAL REVOLUTION?

in industrial production and R&D activities. This broader understanding of Industry 4.0 or the Fourth Industrial Revolution brings us closer to the theme of wide socioeconomic transformation induced by the digital age, to which many world leaders, politicians and industry experts have been referring to in recent years. Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, argues that “We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society”. The notion of a paradigm shift has also been predicted by Jeremy Rifkin, economic and social theorist, the bestselling author of numerous books about the impact of scientific and technological changes and a lecturer at the University of Pennsylvania. In his most recent book he goes as far as anticipating the emergence of a new

economic model “in the twilight of the capitalist era”, which is “better suited to organize a society in which more and more goods and services are nearly free”. As the title of his book “Zero Marginal Cost Society” also suggests, he predicts that due to the advances in technology and the internet of things (IOT), or the internet of all things, the communications, transportation and energy industries will change to such extent that will most likely reduce the marginal cost of production to a near zero level in the not-too-distant future and consequently trigger a paradigm shift in our existing socioeconomic models. The question remains as to which technological advances have the potential to change the processes of manufacturing and production to such extent that will have a deep, systemic impact on the economy and society at large. The term Industrial Revolution was introduced by French economist and political activist Auguste Blanqui in 1837 to highlight some parallels between the economic and social changes resulting from the transition of the industry to powerdriven machines in the late-18th and early-19th century Britain, and the sudden redistribution of political power in contemporary France. As in France the transformation of the political system

has been named a “revolution”, the changes in Britain, which were at least equally fundamental, made an industrial revolution. The term became widely known through the book by British economic historian, Arnold Toynbee, entitled “The industrial Revolution”. Toynbee, however, primarily focussed on the changes in the control of production and the distribution of wealth, rather than the revolutionary nature of the transition itself. As John Komlos, Emeritus at the Chair of Economic History at the Ludwig-Maximilians University of Munich, pointed out, he apparent contradiction between the evolutionary nature of economic development and the discontinuity

– T hey are immediately transferable to rapidly industrialising nations. – T hey are key to leapfrogging for basic industries.

in the rate at which output, the labour force and output per capita grew in the wake of the industrial revolution can be resolved if we view the industrial revolution not as a structural break, but as an integral part of the economic experience of the previous millennia.

the drivers of technological change. The physical manifestations of the technological changes are primarily linked to the appearance of self-driving vehicles, 3D printing (additive customised manufacturing), advanced robotics and the use of new materials, such as self-healing and self-cleaning smart-materials, metals with memory or ceramics that convert pressure into energy.

From the creation of the first mechanical loom in 1784, we can distinguish four waves of industrial revolution. The first industrial revolution at the end of the 18th century was characterised by the use of water and steam power to industrialise mechanical production. The second industrial revolution at the beginning of the 20th century used electricity in new production methods, such as the introduction of the conveyor belt to support mass production. The third industrial revolution automated production by means of digital technologies and IT. Whether the current transformation can be considered the fourth industrial revolution or simply an acceleration of the third industrial revolution and the digital conversion started in the 1960s is still subject to debate. American economist and political theorist Walt Whitman Rostow was already talking about the concept of the fourth industrial revolution in the 1980s. In his view, the fourth industrial revolution is characterised by industries based on revolutionary technologies that are just moving from invention to innovation and that share the following four characteristics: – T hey are so encompassing that no one country can dominate them completely. – T hey are linked to areas of the basic sciences that also are undergoing revolutionary changes.

In his latest book entitled The Fourth Industrial Revolution Klaus Schwab confirms that indeed we are witnessing a revolution, which “entails nothing less than a transformation of humankind”. His conviction is underpinned by the velocity, breadth and depth and systems impact of the changes that derive from the combination and interplay of different megatrends. He identifies three such megatrends, physical, digital and biological, as

“Whether the current transformation can be considered the fourth industrial revolution or simply an acceleration of the third industrial revolution and the digital conversion started in the 1960s is still subject to debate.” The collection of data using sensors, cloud computing, the application of big data analytics as well as artificial intelligence and machine learning link the physical side of technological advancements to the digital, making the Internet of Things transformative across all industries.

The digital manifestation of the fourth industrial revolution also provides the basis for technology-enabled platforms which connect individuals and institutions in new ways, such as blockchain (a digitally distributed ledger mostly known from Bitcoin) and the platforms of the on-demand or sharing economy, such as AirBnb or Uber. The societal effects of these technologies are apparent. As Tom Goodwin wrote in his famous TechCrunch article in 2015, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening”. It is more than “interesting”. The biological megatrends of the fourth industrial revolution are turning into reality innovations that would have seemed realistic only in the realm of science fiction a couple of decades ago: cheap genetic sequencing and synthetic biology will revolutionise not only healthcare and life sciences but also agriculture and the production of bio fuels. SOCIOECONOMIC CONSEQUENCES OF THE FOURTH INDUSTRIAL REVOLUTION The impact of the next industrial revolution on businesses, governments, media, civil society organisations and the people themselves is at least as wide-ranging and complex as the breadth and depth and systemic nature of the underlying megatrends. The expected effects range from practical ones to ethical considerations, and carry monetary and societal implications as well. The fourth industrial revolution could improve the lives of billions of people all over the world, but at the same time generate some serious challenges and risks, which must be mitigated in order to ensure inclusive growth. One of the most salient effects of the next industrial revolution will be the profound impact of disruptive changes on business models and the employment landscape. We have already experienced major dislocations in labour markets over the past decades, with production and

workplaces shifting to low-cost manufacturing locations in developing countries from more advanced economies. Nowadays, however, as production is becoming more and more automated with the use of intelligent machines, the competitive advantage generated by low-cost human resources is declining. This means that a share of jobs is becoming obsolete or is increasingly reshored to its original country, causing a shift that has a negative effect on economies based on labour-intensive production. It is the case in China as well: the comparative advantage from cheap labour-based manufacturing will not support sustainable development, and moving up the value-chain will be required to maintain longterm competitiveness.

education systems in embracing technological advancements, effectively contributing to social development.

“The fourth industrial revolution could improve the lives of billions of people all over the world, but at the same time generate some serious challenges and risks, which must be mitigated in order to ensure inclusive growth.”

Changing manufacturing methods, as mentioned above, will disrupt the labour market, but previously unknown opportunities for businesses will also open up to enhance effectiveness and expand product and service offerings, which is expected to give impetus to the adoption of a more sustainable model of consumption. Companies will be able to enrich their customer experience through digital technologies, develop products with the use of sensors, data analytics and connectivity, and foster more collaborative innovations, involving start-ups and research institutes in their design processes and creating organisational forms which can better serve and suit a knowledge-based society.

According to the “Future of Jobs Report” of the World Economic Forum, the labour market transformation is expected to result in heightened productivity levels and widening skills gaps, displacing significantly more jobs than creating new ones. About two thirds of disrupted job families will be in routine white-collar office functions, which raises the need for governments, businesses and individuals to prepare for changes and future skills requirements. 65% of children entering primary school today are estimated to end up working in jobs that do not yet exist. This underpins the importance of

One often cited example regarding the economies of scale and labour intensity of production compares Detroit of 1990 with Silicon Valley of 2014 (Schwab 2016:10). In Detroit, a traditional industrial centre, the three biggest companies had a combined market capitalization of US$36 billion, revenues of US$250 billion, and 1.2 million employees. In 2014, the three biggest companies in Silicon Valley had a market capitalization of US$1.09 trillion, generated roughly the same revenues as Detroit did (US$247 billion), but with about 10 times fewer employees (cca. 137,000).

Sustainability is a key issue of the next industrial revolution, since the improvement of energy efficiencies and the increasing reliance on green technologies and renewables may not only boost the productivity of nations heavily reliant on the consumption of fossil fuels, such as China, but may also enhance global resources security and mitigate risks related to climate change. Of course, the creation of a green infrastructure requires substantial initial investment from governments and companies, but can yield significant returns in terms of both direct and indirect effects. In a broader sense, the fourth industrial revolution and the embeddedness of the internet in all aspects of our lives will most probably enhance

and accelerate existing socioeconomic trends such as the growing level of inequality (OECD 2011). More than one half of the world’s population lack internet access and almost twenty per cent of the world’s population lack access to electricity. If the diffusion of innovation is not governed adequately, the “digital divide” will continue to widen between nations, communities and individuals, resulting in uneven trajectories of development, especially in countries that already experience significant regional divides, such as China. As the OECD report points out, the rise in living standards has been substantially contributable to innovation since the First Industrial Revolution, and innovative performance fulfils a central role in competitiveness and national progress. It is still valid today, maybe more than ever, that the extent to which a society can embrace technological innovation will be a major determinant of future progress. Finally, we must note that a number of other features of the fourth industrial revolution, such as the shifting balance of relative power between governments and citizens, issues concerning the protection of personal data, information security or the ethical use of artificial intelligence and biological engineering just to mention a few, are equally important and worthy of exploration, but they do not form a part of this paper, as its primary scope is limited to factors related to sustainable economic development and competitiveness. CHINA AT A CROSSROADS Following a long and unparalleled period of economic development in the last thirty years, China is entering the turbulent times of this coming industrial revolution. Since the start of the Reform & Opening-up programme launched by the Communist Party in 1978, the country has experienced an average yearly GDP growth rate of close to ten per cent until recent years, raising per capita GDP more than 50-fold, from US$155 calculated in 1978 to US$7,920 in 2015, thereby lifting 800 million people out of poverty and accounting for more than three quarters of global poverty reduction between 1990 and 2005. It

COULD CHINA BE THE WINNER OF THE NEXT INDUSTRIAL REVOLUTION?

is however worth mentioning that this development has been driven mainly by the eastern coastal regions, upsetting the delicate balance between the rural inlands of the country and the coast. It is often mentioned that the last couple of years have seen a slowdown of the Chinese economic growth, with a declining year-on-year GDP growth rate since 2010, totalling 7.3 per cent in 2014 and 6.9 per cent in 2015 respectively, according to the statistics of the World Bank. Although these figures still considerably exceed the world average for annual GDP growth (2.6 per cent in 2014 and 2.5 per cent in 2015), they do show a declining trend which can be contributed to both external factors and internal structural problems. There has been a decline in the construction industry and manufacturing output, two of the most important drivers of the Chinese economy, but it has been suggested that the contribution of total factor productivity to growth, which was on the rise from 1978, has become difficult to sustain in recent years. The contribution of multifactor productivity to GDP growth has dropped from nearly 50 per cent between 1990 to 2000 to about 30 per cent in the past five years, hindering GDP growth. As it is described by the Solow-model of economic development, the three main drivers of long-term economic growth are labour or population growth, capital accumulation and increases in productivity. Mainly due to China’s birth control campaigns and the introduction of the one-child policy, the country’s population growth has slowed down notably since the 1970s, gradually affecting the size of the labour force, which can no longer drive economic growth. Of even more concern, high levels of gross capital formation as a percentage of GDP (almost 50 per cent) may not be sustainable as China’s total debt has quadrupled, rising from US$7 trillion in 2007 to US$28 trillion by 2014, amounting to over 282 percent of the GDP. Finally, as China is catching up in technology with the world leaders, it is approaching the innovation frontier where productivity cannot be further increased by relying exclusively on FDI and technology transfers, and there is a need to generate domestic innovation. It is imperative

for the economy to move from an investmentled model to a productivity-based one, to further drive development.

Gross domestic expenditure on R&D (US$ Million)

“China should transition to an economic model centred on raising productivity, to regain economic dynamism and potentially generate US$5.6 trillion of additional GDP by 2030.” According to the estimate of the McKinsey Global Institute (2015), in order for China to reach its average annual GDP growth target of 5.5 to 6.5 per cent for the next 5 years, multifactor productivity growth will need to contribute as much as 35 to 50 per cent of total GDP growth, or two to three percentage points per year. Therefore, without labour force expansion and investments to fuel growth, China will have to rely heavily on its innovative capacity to improve productivity. A study led by Jonathan Woetzel, a partner at McKinsey & Co. China, published in June 2016, advocates a scenario according to which China should transition to an economic model centred on raising productivity, to regain economic dynamism and potentially generate US$5.6 trillion of additional GDP by 2030. The findings of the McKinsey Global Institute (2016) suggest that, by seizing five major opportunities to raise productivity, the country could combat slowing growth, deteriorating capital productivity and falling corporate returns, and thus achieve sustained economic progress. The authors also warn that delaying the restructuring of the Chinese economy could become expensive, as the ratio of non-performing loans could reach 15 per cent in 2019 from today’s official figure of 1.7 per cent. According to their calculations, every year that China carries on the current path of development could increase the costs of

Source: OECD

dealing with bad debts by US$300 billion to USD 450 billion, potentially causing a substantial slowdown, if not a systemic banking crisis, that could entirely halt economic progress. The study identifies five major opportunities for China to move toward a productivity-based economic growth model, including: increasing consumption by serving middle-class consumers better; enabling new business processes through digitisation; moving up the value chain through innovation, especially in R&D-intensive sectors; improving business operations through lean techniques and higher energy efficiency; strengthening competitiveness by deepening global connections, potentially raising productivity. Three of the five opportunities listed above – the digitisation of business processes, moving-up the value chain, or increasing efficiency through lean techniques – are directly related to China’s capability to innovate. The remaining two opportunities – serving middle-class consumers better and strengthening global competitiveness – also have strong indirect connections to increasing productivity by deploying knowledge and using new technologies.

THE INNOVATIVE CAPABILITY OF THE CHINESE ECONOMY The capability to innovate and to bring innovations successfully to market will be a crucial determinant of the competitiveness of nations over the coming decades, as an OECD report also points out. According to the study, there is a growing awareness among policymakers regarding the impact of innovative activities on long-term economic progress and prosperity. Since advances in new technologies enabled new forms of competition and opened new markets for the creation and delivery of innovative products, there has been a significant increase in R&D efforts in a number of economies, outside the OECD area as well, and a universal realisation that co-ordinated, coherent, “whole-ofgovernment” approach is required to ensure the central role of innovation in the economy. These trends indicated by the OECD very much coincide with China’s ambitions and policies to boost the innovative capacity of the economy, but the question remains as to what extent the particular measures and investments to boost innovation actually translate into measurable impact and tangible results.

COULD CHINA BE THE WINNER OF THE NEXT INDUSTRIAL REVOLUTION?

China’s share in the global revenue pool to its share of global GDP Science-based

Engineering-based

0 of 4 above GDP line

3 of 8 above GDP line

Commercial aviation Medical devices

Biotechnology

Oil and gas engineering and equipment manufacturing

Semiconductor design Speciality chemicals

Application and system software

Branded pharmaceuticals

Automotive (cars and parts)

Household appliances

Communications equipment

Internet software and services

Wind turbines Railroad equipment

Internet retailing Consumer electronics

Paper and forestry

Home entertainment software

Semiconductor foundry and back-end engineering

Smartphones

Industrial machinery Oil and gas upstream and downstream

Consumer packaged goods

Commodity chemicals

Solar panels Generic pharmaceuticals

Customer-focused

Electrical equipment Construction machinery

Steel

Construction materials

Textiles

Revenue fair share of Chinese companies, 2013 | Index: 1 = GDP share

https://www.mckinsey.com/~/media/McKinsey/Global%20Themes/Innovation/Gauging%20the%20strength%20of%20Chinese%20 innovation/MGI%20China%20Effect_Full%20report_October_2015.ashx

the automotive industry China has not become globally competitive yet. The authors used a multifactor productivity approach for their analysis, inspecting growth while excluding such factors of production as labour and capital investment, to establish a proxy for the macroeconomic impact of innovation broadly defined, including productivity gains from pushing the innovation frontier, knowledge transfers or technological catch-up.

ing cutting-edge innovations in fields such as the development of hybrid cars and hydrogen fuel cells, the global leaders will increasingly shift automotive engineering and R&D offshore, with China being the main destination. By examining industry-specific examples, the authors conclude that in all the cases reviewed, both China and India have managed to significantly narrow the technological gap, and even though they have not yet seriously challenged global technological leaders, the prospects for catching up remain firm, provided the two countries succeed in handling certain economic and political risks.

teristics unique to the Chinese economy, such as the size of the customer basis, the extensive manufacturing ecosystem or favourable government regulations, which helped accelerate innovation by creating local demand. As the figure shows, Chinese companies are doing particularly well globally in industries based on customerfocused innovation, where they have captured more than their expected share of global sales as compared to China’s share of global GDP, in three out of seven sectors analysed.

9 or 12 above GDP line

3 of 7 above GDP line

Source: MGI 2015:5

Efficiency-driven

success in building the world’s biggest electronics production hub for global markets is strongly associated with foreign direct investment (FDI), as showcased by Huawei Technologies, Lenovo, and the Haier Group. Regarding the automotive industry, the other industrial sector examined in the study, they concluded that although domestic innovation still lags behind leading nations, the path of development is remarkable, as China has become the fourth-largest producer in the automobile industry worldwide although it did not have any relevant production capacities only twenty years ago. They also called attention to the fact that, with national programmes target-

The figures suggest that China is already a world leader in the promotion of innovation. Its annual expenditure on research exceeds US$300 billion, slowly but steadily catching-up behind the United States. Every year almost 30,000 students graduate in science and engineering, and the country leads the world in patent applications with almost a million applications filed in 2014. However, the performance of Chinese companies commercialising innovations and competing in global markets does not always reflect the potential implied by the levels investment and the promotion of R&D in the country.

on some of the major difficulties involved in assessing the innovative capabilities of the two countries. The authors claim that indicators of innovative capabilities tend to focus on input factors, making it difficult to assess whether the gap between effort and achievement is due to the normal maturation time for innovations, or whether it is due to inefficiencies in the emerging innovation system. In an attempt to come to an overall judgement, the authors conclude that separate analyses of specific industrial sectors are needed in order to evaluate innovation performance, since analysis based on overall indicators yields poor results.

A study by Altenburg and his co-authors, analysing China’s and India’s transition from productionbased to innovation-based economies, sheds light

When assessing the innovative capabilities of the electronics industry in China, Altenburg and his co-authors (2008) found that China’s

A study published by McKinsey Global Institute last year (2015) follows a very similar logic when assessing the innovation capabilities of the Chinese economy. To evaluate innovation performance, the authors developed a framework which analyses industries by their “innovation archetype” in lieu of national-level metrics, in order to provides more useful insights on the role and level of innovation by sectors. Four archetypes of industry innovation were identified in the study, including: customer-focused, efficiency-driven, engineering-based, and science-based. To gauge China’s success in these dimensions, the authors compared the revenues of Chinese players in certain industries to their expected share of global exports, based on China’s share of Global GDP. As it is revealed by the share of Chinese companies in the global revenue pool, China has become a leading innovator mostly in industries which grew by serving domestic demand, while in the more challenging types of innovation, such as branded pharmaceuticals, biotechnology or

Looking at the overall results of the analysis, it becomes clear that Chinese companies are more successful in archetype industries in which they were able to take advantage of certain charac-

The Chinese experience in customer-focused innovation has turned out to originate primarily from the appliance industry, where Chinese companies started serving the growing consuming middle class of the rapidly urbanising nation by offering household appliances that match the quality provided by global competitors, but at a considerably lower price. Continuously meeting consumer expectations has led to the emergence of companies such as Xiaomi, a smartphone and electronics producer, following a „cheaper and better” strategy vis-à-vis global competitors. Tapping into the massive consumer base poorly served by the traditional Chinese retail, services and media sectors also made it possible for companies such as Tencent, Alibaba, Baidu or NetEase to grow by unleashing grassroots entrepreneurship and become some of the world’s largest internet companies, in terms of their market capitalisation. The Internet Plus action plan announced by Premier Li Keqiang in March 2015, at the 12th National People’s Congress (The State Council of The People’s Republic of China 2015) aims

COULD CHINA BE THE WINNER OF THE NEXT INDUSTRIAL REVOLUTION?

at further promoting the application of internet technologies in conventional industries, nurturing business development in rural areas by improving broadband internet access and ecommerce. Overall, high customer expectations and domestic competition in consumer-focused innovation-based industries in China are likely to push Chinese companies to compete more fiercely on the domestic market and to further expand also internationally, utilising their acquired knowledge in the global arena, particularly in emerging markets.

“The China effect on global innovation report (MGI 2015) finds that in efficiency-driven industries China achieved more than its GDP-based share of global revenues in 9 out of 12 sectors analysed.” Regarding efficiency-driven industries, the sheer size of the Chinese workforce and the modern supply-chain infrastructure concentrated in industrial zones specialised in flexible manufacturing and mass production provides an unmatched environment for process innovation. The China effect on global innovation report (MGI 2015) finds that in efficiency-driven industries China achieved more than its GDP-based share of global revenues in 9 out of 12 sectors analysed. The role of government policy interventions is accentuated in some of the sectors analysed, where intentionally boosted local demand has driven supply and subsequently also efficiencies in production. This is the case for the production of solar panels, where China, capturing more than half of the global revenue over the years, has become a dominant player.

Growing competition with South-East Asian nations as destinations offering cheap, offshoring production makes China move to the nextgeneration manufacturing model, by upgrading its existing ecosystem. The Made in China 2025 initiative, drafted by the Ministry of Industry and Information Technology (MIIT) over two and a half years, with input from 150 experts from the China Academy of Engineering (Kennedy 2015), aims at comprehensively upgrading Chinese industry, also by fostering collaboration with the German government’s “Industry4.0” programme. The Made in China 2025 programme focusses on making Chinese manufacturing innovationdriven, by applying the “quality over quantity” principle and green technologies. The plan identifies the goal of raising domestic content of core components and materials to 40 per cent by 2020 and 70 per cent by 2025 and that of supporting the creation of manufacturing innovation centres (Kennedy 2015). The core of the plan focussed on developed leading-edge advanced technologies, accumulation of intellectual property, and leveraging access to the Chinese market in exchange for foreign technologies. In addition to far reaching technological goals, it also promotes the development of traditional industries and a modern services sector, letting market mechanisms play a more prominent role in its implementation. If China can upgrade its manufacturing capacities in a digital ecosystem, serving its global customer base with rapid and flexible manufacturing and modern logistics, it can become virtual manufacturing resources for companies and even individual consumers around the world, and is estimated to expand its GDP growth potential in manufacturing from 10 to 20 per cent by 2025. While China is already a world leader in several industries based on consumer-focused and efficiency-driven innovation, so far the country has had mixed success in engineering- and sciencebased innovation. While China has realised a superior share of global revenues related to its share of the global GDP in businesses such as railway equipment, wind turbines and telecommunications (also owing much to favourable government policies), in other sectors, such as commercial aviation or the automobile industry, it could not yet capture the opportunities of

The organisational structure of the Science and Technology system in China

Source: Dolla 2015, pp. 170.

the knowledge transfer to the extent to be able to develop globally competitive products and services. In the science-based archetype industries analysed in the report (such as branded pharmaceuticals, biotechnology, semiconductor design and specialty chemicals), the picture is even more homogeneous, with the total global revenue shares of Chinese companies operating in these sectors have as little as 1 to 3 percent of global revenue. IS CHINA READY TO CREATE BREAKTHROUGH INNOVATION? China’s commitment to lead global innovation is even more apparent now, as President Xi Jinping has highlighted science-based innovation in the government’s 13th Five-Year Plan as one of the cornerstones of the national action plan. However, the promotion of science and technology is not a recent direction in Chinese economic development policy. As described by Steve Blank, consultant and guest lecturer on entrepreneurship at U.C. Berkeley and Stanford University, beginning in the 1980s, China started a series of science and technology programs in five areas (support of basic research, high technology R&D,

technology innovation and commercialization, construction of scientific research infrastructure, and development of human resources in science and technology). According to OECD statistics, expenditure on R&D as percentage of GDP has almost quadrupled in the past 25 years, exceeding 2 per cent in 2013, in parallel to the initiative. The past of the Chinese National Innovation System is characterised by gradual transformation from a largely state-regulated model, to a hybrid, relatively market oriented one. The State Science and Technology Leading Group (STLG) was established on the modernisation initiative of Deng Xiaoping in 1981, and fulfilled the role of the highest body in the science and technology system in China. By setting up a supra-ministerial body, scientific development has been placed under the Premier ’s direct control, allowing scientific policy to be established at the highest level possible, coordinating between ministries and provinces. The group was later reorganised, under the name State Leading Group of Science and Technology (SLGST), headed by Premier Li Peng, building “socialist science and technology” with Chinese characteristics.

COULD CHINA BE THE WINNER OF THE NEXT INDUSTRIAL REVOLUTION?

Parallel to the STLG and SLGST, the State Science and Technology Commission (SSTC) was re-established in 1977, after its shut-down during the Cultural Revolution, with the aim of granting scientific research and technological development a special status separate from (though coordinated with) central economic planning. The STC managed the operational network, implementing policy and monitoring activities and resources, at the national and provincial levels. Later STC transformed into the Ministry of Science and Technology (MOST), the leading organ of Chinese science and technology institutions operating today. Within the network of organisations, it is worth mentioning two significant institutions in the Chinese science and technology landscape: the Chinese Academy of Sciences (CAS), operating research institutes throughout the country, and the China Association of Science and Technology (CAST), a professional association engaged in mainly consultation activities, bringing together scientists and administrators, as an umbrella organisation at national, provincial and municipal levels. As for the state funding of research activities, the National Natural Science Foundation (NSFC) is the largest agency for the support of basic and applied, technology-oriented research in natural sciences.

VC Investment in Different Regions (US$ Billion)

Data source: Ernst & Young, Citi Research (Citi GPS 2016:8)

parts of the world. If we look at the sources of R&D funding by sector, based on the data of the UNESCO Institute for Statistics, we find that ten years ago about 70 per cent of funding originated from business enterprises, 20 per cent from the government and 10 per cent from universities. Today this ratio is around 75 per cent, 15 per cent and 10 per cent respectively, displaying a structure similar to that of Western countries, which reflects well the growing market orientation of R&D activities.

Simultaneously with the transformation of the Chinese innovation system, the entire institutional framework has undergone fundamental alterations in the last 25 years. The business sector has become the leader in R&D performance, from having a share of less than 40 per cent in the early 1990s. The share of public research institutes in R&D has declined by almost one half, while that of higher-education institutions remained mostly even. Enhancing the innovation capability of the business sector has been a deliberate and challenging undertaking, involving the “mechanical” conversion of public research institutes into business entities.

Today it is widely accepted that universities and public research institutes have played a crucial role in the development of several high-tech regions in the world, and contributed to the advancement of technological capabilities. It should be noted that most R&D-intensive enterprises in China have usually emerged from the public sector, such as Legend, the predecessor of Lenovo, which was established in a CAS institute. Today these innovative firms are investing in R&D activities abroad and are facilitating the technological catch-up process, by channelling knowledge back to China (OECD 2007b).

Although state influence remains strong, the overall Chinese science and technology landscape today constitutes a hybrid system, in which government, business enterprises and academic circles coexist in a similar way as they do in other

Perhaps the most interesting domain of the Chinese science and innovation policy is the system of structured support for small technology-based firms. The majority of these centrally planned science and technology support

programmes have been initiated by the by Ministry of Science and Technology (MOST) and the National Natural Science Foundation (NSFC). The Torch Programme is an excellent example, which is considered by any as one of the most successful entrepreneurial programmes in the world, which is managed relatively independently from central planning .The programme has four pillars: Innovation Clusters, Technology Business Incubators (TBIs), Seed Funding (Innofund) and Venture Guiding Fund, providing a comprehensive support ecosystem for high-tech companies and start-ups, in order to help them develop and bring innovations to the market. As demonstrated by the Torch Programme, the Chinese state has made substantial investments in the development of science parks and incubators. While many of these small firms remain dependent upon public support granted by the different levels of government or are tenants of science and technology parks, the recent period has seen the emergence of purely market-based innovative networks of small firms in some regions, notably Zhejiang, Jiangsu and Guangdong, creating a cluster effect. As reported by the National Bureau of Statistics of China (NBSC) in 2013, the regional cluster effect is highlighted, as the R&D expenditure of industrial enterprises in the top three regions (Jiangsu, Guangdong and Shandong) accounted for more than 40 per cent of the total. As Michael Porter described in his landmark article, “Clusters and the New Economics of Competition” (1998), the economic map of the world is dominated by clusters, “critical masses – in one place – of unusual competitive success in particular fields”, which “affect competitiveness within countries as well as across national borders”. The impact that clusters exert on competitiveness derive from their capability to generate and develop breakthrough innovations that create new industrial domains and to redesign radically its industrial value chain. Therefore, clusters are essential components of the creation and dissemination of innovation in the economy. The competitive advantage of an innovative cluster is based on its capability to nurture the founding of start-ups developing breakthrough technologies.

“…currently the second largest amount of VC funding goes to the city of Beijing, which has increased its VC investment share from US$ 0.9 billion in 2009 to a staggering US$7.7 billion in 2014.” Silicon Valley is the most famous innovation cluster in the world, home to the semiconductor, computer software, and related electronics industries (Citi GPS 2016), attracting the largest amount of venture capital (VC) investment, with investments amounting to almost US$25 billion in 2014. What is not so widely known is that currently the second largest amount of VC funding goes to the city of Beijing, which has increased its VC investment share from US$ 0.9 billion in 2009 to a staggering US$7.7 billion in 2014. Venture capital plays an important role in in supporting smaller technology companies in China, since the largely state-owned banking system mostly provides loans to bigger corporations, especially stated-owned enterprises (SOEs). Therefore, the source of financing for small enterprises can either stem from government funds through the previously mentioned programmes, or from private investors. Further examining the role of venture capital in supporting innovation, the researchers at Stanford university have found that venture capitalists are a major (and underestimated) source of power and robustness of the innovation network. The authors applied complex network theory to analyse the innovative capability of the Silicon Valley, viewing the economy as a complex network, defining entrepreneurship and innovation as a result of interactions of numerous economic agents. According to their findings, venture investors contribute to

the innovation system not only through financing and selecting start-ups, but also by enhancing collective learning, embedding social ties within the network and signalling levels of risk.

possible negative side effects of this initiative are yet to be assessed, the scale of investment in this globally unique experiment signals the government’s commitment to development.

As in the case of science and technology support programmes, VC investments have also come a long way in China: in the first wave of start-up funding in the 1990s, 85 per cent of start-up funds of new technology companies in Beijing came from the research centre or university which they left. The second wave of technology investors were Chinese banks, primarily through the Torch Programme. Science and Technology Industrial Parks were the third source of support for new ventures licensed by the local government, also through Torch Technology Business Incubators. Today, there are over 1,000 Private Equity and Venture Capital firms operating in China, taking advantage of the introduction of the “Renminbi (RMB) funds”, which have fewer restrictions on what industries the fund can invest in, less regulatory oversight and access to listing a portfolio company. RMB funds can be set up both as domestic funds (fully owned by Chinese investors) or foreign-invested funds (partially or fully owned by non-Chinese investors).

Although the initiative is supposed to encourage entrepreneurship throughout the country, the centre of the Chinese start-up ecosystem remains in China’s Silicon Valley (Zhongguancu) in the Haidian District of Beijing. This technological cluster is primarily focused on the Technology, Media and Telecommunications (TMT) segment, with about half of the investment deals targeted at internet businesses. The area brings together start-ups and global technology leaders as Nokia, Motorola, Sony Ericsson, Microsoft, IBM, Sun, Oracle or Google, and is located close to some of China’s best universities, such as the Peking University, Tsinghua University, the University of Science and Technology of Beijing and the Beijing Institute of Technology, creating ideal conditions for innovation to flourish. Although there is no exact recipe for creating a truly innovative economy, all of the factors mentioned above, such as the solid institutional framework, attractive research systems, accessible financial and technical support to entrepreneurs and businesses, are some good indicators to capture the density and quality of relationships existing within the innovation system, and they can also serve as a starting point to examine missing competencies that could enhance the overall robustness of the system.

According to a report on Chinese venture capital published by Ernst&Young (2015), the top five investors by the number of deals were mostly North American firms, completing almost 300 deals during the year. Beside private sector investors, as communicated by Bloomberg magazine, the Chinese government intends to bolster innovation and reduce dependence on heavy industry by setting up a government-backed venture fund of over US$200 billion in 2015, an amount unmatched worldwide. The 780 funds nationwide that receive financing for investment from this amount will most probably boost entrepreneurship in the country, according to the government’s plans. Although the efficiency and

FACTORS HINDERING THE GLOBAL RISE OF THE CHINESE HIGH-TECH SECTOR With about one hundred National High-tech Industrial Zones and numerous technology specific clusters such as Donghu, Wuhan (optoelectronics), Zhangjiang, Shanghai (integrated circuits and pharmaceuticals), Tianjin (biotech and new energy), Shenzhen (telecommunications) and

Zhongshan (medical devices and electronics), operating in the country with extensive R&D expenditure – accounting for 34 per cent of total corporate R&D expenditure in 2010 – it is still not clear why China is seemingly lagging behind in technology- and science-based, innovationdriven industries, despite all the efforts of both the government and the private sector to develop high-tech industries. Some researchers argue that this kind of scientific work simply takes a longer time to pay off, since in such high-tech industries as pharmaceuticals, the market launch of a product is often preceded by 10 to 20 years of development and testing, therefore it is only a matter of time before China’s R&D efforts translate into globally competitive innovative industrial output, in the form of marketable products and increased revenues. Nonetheless, they have also found that such underlying factors as regulatory bottlenecks, issues around the protection of intellectual property and inefficient allocation of public research funding can also play a role in delaying success. Other studies have also identified a number of central challenges that China is facing, including the strengthening the protection of intellectual property rights, the construction of innovative cultures and incentive systems, and the development of human resources. Another possible explanation that has been proposed is that the Chinese market is so large that many domestic companies have little incentive to expand abroad, as certain local advantages are difficult to replicate elsewhere, compared to the convenience that the familiarity of the domestic environment provides. Altenburg and his co-authors argue the opposite, suggesting that the combination of size and fast growth will most probably facilitate leapfrog development in China. They argue that the country can invest huge amounts in R&D as it is capable of capital accumulation on a much larger scale, and will have the opportunity to

COULD CHINA BE THE WINNER OF THE NEXT INDUSTRIAL REVOLUTION?

buy new technologies, even in the form of entire firms; furthermore, it can hire international professionals and managers on an unprecedented scale. In addition, by leveraging its purchasing and political power, China can seek a negotiating position in which it gives access to its market only in return for access to technology, enabling the country to leapfrog certain steps of the technological development process.

“Related to social values, beliefs and norms, it is a common misconception that countries operating in a democratic political system should by definition be more successful economically.” Aside from the time factor, another decisive factor could be that technological advancements and the application of entrepreneurship-oriented and innovative approaches allowing the creation and delivery of new goods and services are strongly related to the diffusion of knowledge and technology in society, which could be influenced by cultural factors. An OECD study (1996) exploring the network characteristics of the knowledgebased economy has recommended to replace the traditional linear model of innovation with a new model centred around the flows and relationships between industry, government and academia, which better reflect the dissemination of science and technology within society. In this system, knowledge distribution power is of key importance, and R&D efforts are just the first indicators to map the diffusion of knowledge and innovation in the economy. In this view, investment in R&D is just as important as investment in education, talent management and the development of managerial skills to successfully utilise innovation.

It has also been observed that the social technologies of innovation, embodied in norms and values, organisational forms, incentive systems and public policies, are more difficult to acquire than the physical ones. Other researchers have examined the role of culture in firms’ propensity to innovate, and they found that autonomous, risk-taking, innovative, competitively aggressive and proactive entrepreneurs and firms depend strongly on their cultural foundation. In short, the specific cultural tendencies of certain countries engender a stronger entrepreneurial orientation, hence experiencing more global competitiveness in the long run. Economic reforms and policies of opening up have reshaped the value system in China, but Chinese culture can be described as more collective and with higher uncertainty avoidance compared to Western countries, which suggests that instilling a culture of risk taking and promoting cross-company collaboration would probably enhance innovative capacity and overall competitiveness of Chinese firms. Related to social values, beliefs and norms, it is a common misconception that countries operating in a democratic political system, should by definition be more successful economically. In an analysis conducted in 115 countries Fagerberg és and his co-authors concluded (2007) that there was no close correlation between the character of the political system and the level of economic development, thus the assumption that the insufficient or deferred results produced by the innovation system of the Chinese economy are directly related to the character of the Chinese political system lacks ground. Instilling a culture of innovation is strongly related to the build-up an entrepreneurial culture and the development of professional and personal networks. It has been observed that strong professional and personal networks that have developed between the new innovative regions in China and India and the old innovative regions in the United States, have helped the mobility of technically skilled entrepreneurs, engineers and scientists, mostly of Indian and Chinese origin. These professionals, with substantial research and work experience in the United States, contributed their skills to their country of origin, creating an effect of “brain circulation” between China, India, Korea and Taiwan.

“…it seems that China’s capacity to diffuse innovation throughout its industrial segment will have key influence on the country’s path of future development.” The Chinese government has recognised the significance of support through talent management in building entrepreneurial capabilities and improving the diffusion of innovation. The government has recently launched the National Medium- and Long-term Talent Development Plan (2010–2020) and the Thousand Talents Plan, both aimed at nurturing domestic talent, as well as recruiting talent from abroad, with the explicit purpose to supply the economy with “educated and skilled individuals (“rencai”). The management of domestic talent, the inflow of foreign talent, and the stream of “sea turtles” – Chinese returnees who have studied or worked abroad – is already slowly changing the Chinese talent pool and will most probably have a transformative effect on Chinese society and economy in terms of the diffusion of the entrepreneurial spirit and creative thinking, which may be the missing piece in the puzzle to convert also the last bits of R&D efforts into tangible results. Finally, China’s ambition to make its R&D activity “go global ” is opening new horizons not only for the country itself, but also for the rest of the world. We can witness as China is becoming a major source of foreign investment in R&D operations globally. In recent years, Chinese companies have been setting up laboratories and research centres around the globe at a record pace, the Financial Times has reported, and announced the opening of nine new overseas R&D centres in 2016 alone, for a total capital expenditure estimated at over US$220 million. With research giants, such as Huawei expanding their R&D operations abroad, China has become

the world’s largest greenfield foreign direct investor, for the first time overtaking the United States. These efforts to increase innovation capabilities could aid Chinese development not only internally, but also externally, by making China an attractive destination of R&D and other knowledge-intensive services for multinational corporations creating a virtuous circle for technological catch-up. SUMMARY Change is imminent, whether we are prepared for it or not; the fact whether we are able to embrace this change will determine the extent to which we can succeed as individuals, communities or nations during the fourth industrial revolution. The new environment created by the coming industrial revolution will fundamentally alter the way we work and relate to one another, bringing about broad socioeconomic, geopolitical and demographic impacts. China is facing the arrival of this turbulent era, after a transition phase full of challenges: leaving behind three decades of remarkable economic and social development, it is entering a stage of weakening growth and increasing uncertainty. The next industrial revolution, like all great changes, will present challenges to tackle and opportunities to seize, and it seems that China’s capacity to diffuse innovation throughout its industrial segment will have key influence on the country’s path of future development. Our analysis indicates that China is already the world leader in various sectors in terms of consumer-focused and efficiency-driven innovation, while growing competitiveness in the engineering- and engineering-based sectors is still to be achieved. Having examined China’s commitment to the promotion of R&D and the existing ecosystem that supports technological and innovative firms, we are confident that if the country can follow its current path of development, continuously supporting the diffusion of innovation in the economy and gradually instilling a culture of innovation, China can become one of the winners, or an outright winner of the next industrial revolution.

RAIL FREIGHT TRANSPORT BETWEEN CHINA AND THE EUROPEAN UNION ON THE NEW SILK ROAD

Author: Péter Bucsky

Both China and the United States announced a new strategy to revive the economy of the region of the medieval Silk Road, part of which is the development of Eurasian transport connections. According to plans, the decrease in travel times and the expansion of relationships will make direct rail freight transport between China and the European Union become more significant. It is worth examining what has been achieved already, taking the commercial data into consideration, and in which areas of the two economies rail freight transport may play a major role.

The quality of transport connections between countries has a substantial impact on the development of the quality and quantity of trade. Travel times and costs determine which goods are competitive to be traded between the regions. Thus, all countries are interested in developing better and cheaper transport systems, improving connections between regions, and contributing to the growth of international trade. For long decades, there has been no significant innovation in rail freight transport, the speed of wagons and engines has not increased: it is generally 100-120 km/h. The tracks are appropriate for this in Europe but heavy traffic causes a growing challenge, especially congestions in the areas of cities. In China, the railway system was for a long time rather underdeveloped but a significant railway development programme was launched in

the 1990s. The primary goal of it was to improve the quality and speed of passenger transport and to establish new railway connections. Rail freight transport also benefited from this, because highspeed trains used the new high-speed tracks and significant capacity became available for freight trains. The two important economic centres have appropriate infrastructure for rail freight transport, but the 10 thousand kilometres between them have to be travelled through countries that were members of the former Soviet Union. In this region railways have a prominent role with a share of 80 per cent in goods transport, as opposed to 10-30 per cent in developed countries. The reason for this, however, is not the rail freight transport’s high level of development, but the underdeveloped road infrastructure, low population density, and very

Logistics performance of countries along the Silk Road, based on the World Bank’s LPI (Logistics Performance Index) rank 2007 country Germany

2016

2007-2016

score

rank

score

rank

Variation of scores

4.1

4,23

Czech Republic

3.13

3,67

17%

China

3.32

3,66

10%

Poland

3.04

3,43

13%

Kazakhstan

2.12

133

2,75

30%

Ukraine

2.55

2,74

Russia

2.37

2,57

Mongolia

2.08

136

2,51

108

20%

Uzbekistan

2.16

129

2,4

118

11%

Belarus

2.53

2,4

120

-5%

Turkmenistan

N/A

2,21

140

N/A

Kyrgyzstan

2.35

103

2,16

146

-8%

Tajikistan

1.93

146

2,06

153

Countries included

150

160

Source: https://lpi.worldbank.org/international/global

long distances. It is easy to see that, while China’s logistics performance reaches the level of Central Europe – where it is measured additionally to infrastructure along the performance of attached industries and services – countries in Central Asia are considered the poorest performers as far as logistics is concerned. The exception is Kazakhstan, where quality has improved a lot recently. Regarding Belarus and Russia, which are important transit countries, there are still numerous problems.

in modern logistics systems. Railways performed worse than their competitors in Europe exactly in these fields, and these services are even less developed in the former Soviet region and China – as underpinned each year by the LPI reports.

Rail freight transport can be competitive only in long distances, that is roughly over 700 km according to a rule of thumb in the European rail industry. However, it is more difficult to determine over what distance it is still worth transporting by rail rather than the slower but much cheaper ship. Another important question is how to specify those other boundary conditions that are necessary for the competitiveness of rail goods transport, because the existence of tracks is although a necessary, but not sufficient condition for that. What is more, supplementary services, such as intermodal freight transport terminals, door-to-door delivery solutions, accurate delivery time information, warehouse and distribution centres and flexible quantity and pricing solutions, gain growing importance

The railway connection between Europe and Asia was established by the Trans-Siberian Railway in 1917, which has been used in freight transport since 1936. Thus, direct railway connection between China and Europe has been available for 80 years. In the past period the biggest progress was the establishment of a new railway corridor via Kazakhstan. This route may offer a 2 thousand kilometres shorter journey between the Central and Southern Chinese regions, and between Central Asia, European Russia and Europe. As available data reveal, the trade in goods of the Trans-Siberian route was 420 thousand TEU (twenty-foot equivalent unit) in 2012, and 240 thousand on the Kazakh route. It is important to note here that the majority of this cargo did not go to Europe, but to CIS states.

THE EURASIAN LAND BRIDGE FROM AN ECONOMIC AND POLITICAL PERSPECTIVE The Kazakh connection

RAIL FREIGHT TRANSPORT BETWEEN CHINA AND THE EUROPEAN UNION ON THE NEW SILK ROAD

Source: http://www.unescap.org/resources/trans-asian-railway-network-map

Source: https://america.cgtn.com/2017/05/13/5000-china-europe-cargo-trains-expected-by-2020#

The railway connection between China and Kazakhstan was established in 1991. The railway connection between Urumqi and Alashankou was possible to establish thanks to the ease of political tension between China and the Soviet Union in the second half of the 80s. It seems there is no real possibility of establishing a shorter and faster railway connection in the short or medium term.

“The transport development plans of the New Silk Road concept support not only the Chinese export, but their goal is to export the Chinese development model as well.” Creating alternative transport connections can have not only economic but also political and security reasons. Having the shortest possible connection with the economies of the Eurasian region may serve the security of supply in China. The line

through Kyrgyzstan and Uzbekistan enables bypassing Kazakhstan, but only by crossing the politically isolated Turkmenistan and Iran. Through these countries a new connection between China and Turkey could also be set up. An alternative route for this could be the ferries from Kazakh ports to Azerbaijan, from where trains could reach Turkey circumventing Armenia. There are several other, locally significant Asian railway development projects in progress, but their importance cannot match the importance of the Kazakh line. TRANSFORMATION OF THE CHINESE ECONOMY For reasons of the growing interest towards rail freight transport it might be worth examining the changes in the structure of the Chinese economy. Since the turn of the millennium, China has financed numerous infrastructure developments and these appeared in the New Silk Road concept in 2013. The transport development plans of the New Silk Road concept support not only the Chinese export, but their goal is to export the Chinese development model as well. Railways in this concept have a much larger significance in the direction of the Central Asian countries than to Europe, because developments in Central Asia support

Chinese capital investments and the establishment of production units. In respect of European destinations, maritime transport will continue to be the main means, but a slight shift is expectable from the Western ports (Rotterdam, Hamburg) to the South European ports (Piraeus, Trieste, etc.) – mainly because part of these is in Chinese hands.

Inner China can be as far as 2,000 km from the sea ports, so it’s much more likely to be worth transporting goods to Europe from there, or from Europe to those cities through the continent. Since 70-80 per cent of Chinese export is based on import, transport in both directions plays a significant role.

Beside Chinese international interests and roles, the transformations inside China also play an important part in the situation of the Eurasian land bridges. The goal of Chinese politics is to develop the inland territories, which has been also forced by the economic necessity, because the workforce is increasingly more expensive in the coastal cities and problems in labour supply are occurring ever-more frequently. As a result of the one-child policy, workforce growth has practically stopped by now.

Because of the increasing Chinese wages and the decreasing labour force, part of the factories must find new investment locations. An ideal area for that may be Vietnam or Bangladesh, which can be reached by ship. The second ideal location would be Central Asia, but for that the area needs infrastructural development. However, the mere 70 million population strongly limits the development possibilities in the area. At the same time, since environment protection regulations are becoming stricter in China, moving polluting and energy intensive industries to the area can be observed. For instance, a cement plant is constructed in Tajikistan. Such plants of heavy industry typically need rail freight transport. Relocation of agricultural production to neighbouring countries can also gain an important role. This typically means production of goods in large quantities that can be transported cheap via railway, which underpins the rationale behind the Chinese infrastructure investments.

Meanwhile, wages increase continuously in the Chinese coastal cities, simple mass production is moving to the inland territories. Cities in

GEOPOLITICAL GOALS AND ECONOMIC REALITY

Source: https://www.rba.gov.au/publications/bulletin/2016/jun/pdf/bu-0616-5.pdf

The majority of transport connections drawn on the map, plans and goals usually are not realised, especially if they are motivated not so much by

RAIL FREIGHT TRANSPORT BETWEEN CHINA AND THE EUROPEAN UNION ON THE NEW SILK ROAD

Modal split of freight transport performance of EU Member States (billion tonne-kilometres)

Rail

Road

Waterways

Air

Pipelines

Share of rail %

Maritime

Source: author’s own calculation based on data of the European Commission Transport Pocketbook

Modal split of China’s freight transport performance (billion tonne-kilometres)

Road

Maritime

Rail

Pipelines

Air

Share of rail %

Inland water

Source: author’s own calculation based on data of NBS

market demand but rather political intention. Links established without economic rationality but based on political interest cannot automatically generate more trade. It is much more important to maintain the already existing tracks, shorten travel times and make traffic denser and, even more importantly, to provide service industries in appropriate quality and availability, which cannot be shown on maps. BUREAUCRATIC CHALLENGES In case of Central Asia, the questions of corruption and bureaucracy, the quality or lack of maintenance, difficult international communication are particularly important. Trains between Europe and Asia may be held up at borders waiting 4-5 days for customs and other controls during their 15-20-day journeys. This is a huge development potential with no investment necessary,

but the area is traditionally doing very badly in the “Ease of doing business” survey of the World Bank as far as bureaucracy is concerned – except for Kazakhstan. The OECD carried out its last survey on customs controls’ average duration in 2010, and the area achieved very weak results, the average waiting time at the Uzbek-Kazakh border was 100 hours, which means 4 days. There are legal risks as well, because the European and Asian railways use different legal and insurance systems, and also different waybills. In Europe, the COTIF waybills (Convention concerning International Carriage by Rail - COTIF) are used, while in the former Soviet Union and China the SMPS/SMGS waybills. This causes problems not just because of differences in form but also because there are different legislation systems behind them that are difficult to relate. The common CIM/SMGS waybill is available since 2006,

which is a huge progress, but there are still a lot of possibilities to harmonise the bureaucratic and accounting systems of European and Asian railways.

hides the differences between the individual types of goods, for example in China the series of coal power plant closures are behind the decline of rail transport performance.

ROLE OF RAIL FREIGHT TRANSPORT

It’s worth noting that – according to the Chinese State Statistical Office – the average transport distance was 722 km in 2014, while it was 718 in 1991. Thus, the investments in railway developments of the past fifteen years and the industrialisation in the inland areas could not change these data, which shows that railway was not able to play a significant role in these changes. The above is supported by the fact that the average distance of maritime transport grew from 1554 km to 1866 km in the same period.

General trends and distribution of modes of transport The gradual loss of importance of rail freight transport can be regarded as a general trend in China and the European Union. The tonnekilometre share of railways in freight transport in China declined from 27 per cent to 12 per cent between 1996 and 2015. In the EU, it dropped from 14 per cent to 12 per cent in the same period, so currently the share is the same. Since the growth in total transport performance was low in the EU, the decrease in the share of railways meant decrease in absolute terms as well. In China, the rail transport performance peaked in 2011, since then it has been slightly declining. Therefore, it is difficult to consider rail transport as competitive in the future. It is true though that the average

Container traffic has a key role in transport between Europe and China. Among the member states of the EU Ireland has the highest ratio with 51 per cent of the total transport, but Central European countries have only 10-13 per cent. This can be problematic from a Eurasian transport perspective, because this transport mode is not really widespread in the Central European region.

RAIL FREIGHT TRANSPORT BETWEEN CHINA AND THE EUROPEAN UNION ON THE NEW SILK ROAD

Modal split of the European Union’s foreign trade (export+import) with countries along the Silk Road (based on value, in euros)

Modal split of the European Union’s foreign trade (export+import) with countries along the Silk Road (based on volume, in tonnes)

Based on the industry benchmark, intermodal rail transport can be profitable over 500-700 km. Chinese data are exceptional in this respect, the average distance was 1,800 km. The Chinese railway market, although slowly, but has set out in the direction of container and combined transport, which will still require substantial development. ANALYSIS OF RAIL FREIGHT TRAFFIC BETWEEN EUROPE AND ASIA

Source: author’s own calculation based on commercial database of the European Commission

CHINESE CONTAINER DEFICIENCIES According to the World Bank report, significant production restructuring took place from the Chinese coastal regions to the inland territories of the country. This had considerable importance in the enormous growth in the transport sector between 1998 and 2007. During these 15 years, the GDP rose by 9.7 per cent, while the tonnekilometre transport performance grew by 10.4 per cent, which the railway could not exploit. China would be an ideal country for transport for several hundreds or thousands of kilometres, similarly to the United States. But due to lack of appropriate services and professional knowledge, transport is road-based. According to 2013 calculations, only 1.3 per cent of goods arrives by rail to Chinese ports, which reveals serious underdevelopment of rail container transport capacities. There were merely 20 significant land terminals in China, according to a 2013 study. The cause of the problem is that the Chinese government focuses mainly on passenger transport and does not deal with the development of freight transport services. There is considerable shortage of land intermodal terminals where road and rail cargo could effectively be transloaded. According to the 2016 study of the Asian Development Bank, rail container goods transport was only 2.4 per cent of total trade in tons, which is significantly less than the 20 per cent ratio in the EU and 37 per cent in the United

Source: author’s own calculation based on commercial database of the European Commission

States. China Railway (CR) has already founded its subsidiary specialising in intermodal transport, CR Intermodal. The company runs 18 land container terminals jointly with private investors. Boosting container traffic between Europe and China is unimaginable without the substantial expansion of this capacity. Data of the National Bureau of Statistics of China first contained container transport within rail freight transport in 2016, and they show that it represented 3 per cent of total transport in tons and 8 per cent in tonne-kilometres. Aside from construction materials, this was the only sector the performance of which decreased compared to the previous year.

The European Union’s foreign trade (export+import) with the countries along the Silk Road split by specific value (euro/tonne)

Source: author’s own calculation based on commercial database of the European Commission

The commercial database of the European Union enables the analysis of the EU’s export and import along modes of transport in terms of both value (Euro) and quantity (ton). The proportion of railway in the trade with the countries along the Silk Road does not exceed 1-2 per cent. The Kyrgyz Republic, Mongolia and Uzbekistan are exceptions, but the reason beside low-level trade in goods might be that neither of them has coasts. Only Ukraine on the Eastern border of the EU could show high value, where road infrastructure is rather underdeveloped, while railway is of relatively good quality. This is a good illustration that even in case of such a close country, only 12 per cent of trade value is transported by rail. And this also reveals how limited the opportunities of rail freight traffic with China are. Goods transported by rail represent bigger significance in value than in weight. This supports the assumption that more valuable goods are worth transporting by rail. Transport modes are selected to goods of similar unit value when trading with the countries along the Silk Road. Thus, it is not only transport conditions that determine what means of transport is used in trade with a certain country, but it is also the type and value of those goods. It is also clear that – because of the large distances – it is viable to transport only those goods by rail to China that are more expensive than in other countries, which further narrows the opportunities for this means of transport. Therefore, when infrastructural developments are planned, it is worth considering the structure of the current trade in goods and the available potentials to understand whether the given means of transport can play a role at all.

“…it is not only transport conditions that determine what means of transport is used in trade with a certain country, but it’s also the type and value of goods.” OUTLOOK The physical conditions of rail freight transport between Europe and Asia have been available for a century. However, rail freight transport played a negligible role compared to maritime and road transport. American and Chinese geopolitical strategies foresee the appreciation of the Silk Road region, and they consider railways as an important tool to improve economic and political relations. In the past few years a growing number of analyses have been published about the revival of rail freight transport along the Silk Road. However, currently the proportion of rail transport in the trade between the European Union and China is around 1-2 per cent in both quantity and value terms. Its base value is very low and continuously loses market position in the European Union and China alike. The National Development and Reform Commission of China plans to have 5,000 container trains operating annually between Europe and China by 2020, instead of the current annual 1,500-2,000. This could be reinforced basically by economic structure changes, although Chinese estimations seem a bit optimistic. The biggest customers of Eurasian container transport are automotive and machine industries, and manufacturers of electronic devices. In the latter case, it is a significant advantage that the corrosive effect of salt water vapour, damaging sensitive devices, can be disregarded. Although saved time is important, air transport would not be profitable in case of high-value but heavy products of the machine and automotive industry. According to forecasts, these are exactly the industries that will become increasingly important in the trade between Europe and Asia.

ONE ROAD, ONE BELT FROM GERMANYâ&#x20AC;&#x2122;S PERSPECTIVE

ONE ROAD, ONE BELT FROM GERMANY’S PERSPECTIVE

Author: Viktor Eszterhai

In December 2016 Germany’s Ambassador to China Michael Clauss gave an interview to the South China Morning Post on One Belt One Road and the Central European presence of China. Unlike the usual language of diplomacy, the interview harshly criticised several elements of China’s One Belt One Road programme and its Central-Eastern European (CEE) policy related to the “16 + 1 Cooperation”. Since Germany fulfils a prominent role in the life of the Central-Eastern European region, it is imperative for Hungary to overview the German attitude towards the grand vision of the Chinese foreign policy.

GERMANY AND THE EARLY RECEPTION OF OBOR The countries of the European Union tend to approach the One Belt One Road Initiative (hereinafter referred to as OBOR) in an extremely diffuse way. Typically, the sharpest dividing line lies between Western European countries and Central-Eastern European (CEE) countries. While the former group is far more sceptical about the feasibility of the grandiose plans, the group formed by the latter countries, which China attempts to coordinate under the “16 + 1 Cooperation”, considers the OBOR a unique opportunity to help the region break out from its semi-periphery status. Germany’s attitude towards the OBOR can typically be divide into two different stages. Upon the announcement of the plans in 2013, the German political elite and the press received the Chinese concepts very positively. This was, without doubt, primarily due to the fact that foreign trade is extremely important for the German economy, and the new infrastructure network was seen as a better access to export markets.

“While earlier the better accessibility of markets seemed attractive for Germany, today more and more warning signs suggest that the reverse is also true.” Second, they were seeking better cooperation with Chinese companies under OBOR, increasing the presence of German firms within China. Accordingly, negotiations were started in the fields of railway, logistics and shipping. In March, 2016, state-owned Deutsche Bahn (DB) and the China Railways, while in March, 2016, the privately-owned logistics giant, DHL and the Chinese city of Chengdu signed Memorandums of Understanding. Two of Germany’s important ports, Hamburg and Duisburg, also showed a keen interest in OBOR.

Xi Jinping in Duisburg Although the role of fact that the former term ‘Silk Road’ (Seidenstraße) can be associated to a German geographer, Ferdinand von Richthofen, is less significant, but it is not inconsiderable; therefore, the Chinese announcement had a positive and nostalgic echo in the press. The enthusiastic reception of OBOR was reflected by Chinese President Xi Jinping’s visit in March 2014, during which the railway connection between Chongqing and Duisburg was officially inaugurated. Over the next short period the positive reception of the project remained unchanged, as it was indicated by numerous high-level negotiations. However, a significant change can be observed in 2016, which is clearly reflected by the interview given by Michael Clauss, too. THE CHANGING PERCEPTION OF OBOR The increasingly negative perception of One Belt One Road is mainly due to the economic factor. While earlier the better accessibility of markets seemed attractive for Germany, today more and more warning signs suggest that the reverse is also true. Due to China’s existing technological gap, Chinese products seemingly will not pose a threat to the German industry in the coming decades,

but this situation can rapidly change. The Made in China 2025 Programme, supported by the Chinese Government, aims to catch up with the developed industrial countries by dynamically joining the so-called fourth industrial revolution in certain centrally supported areas of the Chinese industry within a decade. The considerable attention that this endeavour receives in Germany is well reflected by the fact that the issue has become of one of the priorities for MERICS, one of the leading German institutes for research into China. In a study completed in December 2016, MERICS concluded that although the state of development of the Chinese industry would fail to catch up with German standards at a national level by 2025, it could become a competitor of German companies in the areas artificially supported by the Government, both within China and on the global market. Not surprisingly, in his interview Clauss expressed his concern that the protectionism accompanying the “Made in China 2025” programme would push foreign firms out of China, since local firms can obviously succeed more easily on the Chinese market with the help of political support and protection. Naturally, all this would adversely affect Germany, whose fifth most important export market is China (US$76 billion) and who is already running a considerable trade deficit (US$17.7 billion) with China. New Chinese products of the Made in China 2025 programme, which have

ONE ROAD, ONE BELT FROM GERMANY’S PERSPECTIVE

Top five trading partners of the Port of Hamburg (Source: Port of Hamburg) a higher value but require faster transport, can also get to Germany’s traditional markets or even Europe through the infrastructure connectivity implemented under OBOR (primarily railway, as well as railway and maritime transport), which would create competition for the German industry.

Countries most affected by the Made in China Programme

Chinese and German operating capital investments into each other’s countries from 2000 to 2016

In addition, the number of Chinese business acquisitions has drastically increased in Europe in recent years. Again, it was MERICS that highlighted that this process is especially remarkable in the case of high-tech companies (the most widely known case is that of German KUKA’s, which was acquired by the Chinese Midea corporation for EUR 4.5 billion), which can help the Chinese corporations “artificially” narrow their technological gap. For all these reasons, Germany seeks to prevent the acquisition of strategic companies; therefore, it has presented a draft law to the EU which would allow Member States to protect their companies, primarily if the acquisition is driven by political purposes or the acquirer is unable to provide technological transfer for the target company. The large port developments to be realised in the South and South-East of Europe with Chinese support, especially that of Piraeus, have been received with similarly moderate enthusiasm by Germany. The future Budapest-Belgrade railway link will considerably shorten the transportation of the Chinese goods to Western Europe, as compared to ships by-passing the European continent. All this can adversely affect the Port of Hamburg, which is considered the most important centre of trade between China and Europe. Trade with China accounted for over 30 per cent of Hamburg’s traffic in 2016 (2.6 TEUs).

Container traffic of Hamburg and Piraeus from 2010 to 2016 Although certain German companies, particularly DHL, consider the southern ports an advantage, as they accelerate their services (as compared to Hamburg, transport duration is 9 days shorter through Piraeus), the reception is not absolutely positive at national level. Most probably, Piraeus has played an important role in the stagnation in the container traffic of the Port of Hamburg experienced in recent years, while increasing railway transport within the framework of OBOR will keep diminishing the role of German ports in a longer term. In Germany, China’s potential geopolitical ambitions, most clearly demonstrated by OBOR, are also received with strong scepticism. In Germany, many people see OBOR undermining global US hegemony. Although Chinese experts emphasise that OBOR is a historical opportunity that would place Europe in the centre of world history again, Germany’s power would be far weaker in the reviving Eurasian economic region than that of China, which is expected to keep growing in the future.

A comparison of the economic power of Germany and China

Thus, Germany is not necessarily interested in deconstructing the prevailing world order, in which it has extremely successfully integrated with its highly-developed industrial export products and which has allowed it to keep its military expenses permanently low. Finally, Germany considers China’s increasing Central-Eastern European presence especially negatively. The most prominent example is the “16+1 Cooperation”, which can be regarded as one of the institutional innovations realised by China in recent years. In his interview, Clauss pointed out that the parallel institutions built in the region by China are incompatible with the strong commitment towards the EU. Typically, there are two reasons why Germany challenge this cooperation. First, the Chinese investments dilute the severe investment rules of the EU and deteriorate the political unity of the EU. Second, the Germans are concerned about China’s potential political pressure on smaller countries, which results from China’s economic power. In fact, it primarily means that China, exploiting the “16+1 Cooperation”, could actively and, owing to the large number of the countries, efficiently intervene in the internal affairs of the European Union. Thanks to strong German economic relations, the region is considered a traditional supporter of German politics. Therefore, it is not by accident that Germany is primarily interested in directing the relations between China and the Central-Eastern 72

European countries preferably through the channels existing within the EU. ITS INFLUENCE ON HUNGARY AND THE CEE REGION Any further deterioration of the China-Germany relations can pose considerable risks to the Central-Eastern European region and Hungary. Above all, if Germany introduced a protectionist policy, it would trigger a counter-reaction by China. This would be tragic for the region not only in economic terms – China is an important market for the CEE Region and Hungary through German corporations – but also because it would immediately destroy the OBOR-related hopes of breaking out from the periphery status. Therefore, it is the interest of the CEE Region and Hungary that OBOR should connect and not separate the EU and China, in which the CEE countries fulfil the role of a bridge. Although the prospects do not seem to be favourable for the reasons set out above, the process can rapidly take the opposite direction. It is China and Germany’s common interest to establish a single global commercial system with strong international institutions. Donald Trump’s expected protectionist measures can encourage Germany and China to establish closer cooperation, and OBOR can act as the most convenient link to connect them. 73

THE EUROPEAN FORUM FOR BELT AND ROAD COOPERATION CONFERENCE

Author: Ráhel Czirják, László Gere

On 22 nd May, 2017, the European Forum for Belt and Road Cooperation Conference was held by EUOBOR (European Institute for One Belt One Road Economic and Cultural Cooperation and Development) and Pallas Athene Geopolitical Foundation, where invited Hungarian and foreign lecturers presented the opportunities and challenges of the CEE-China cooperation. The event also reflected on the Belt and Road Summit, held in Beijing a week earlier, with special regard to issues relevant for Hungary and the CEE countries.

The conference was opened by Zhou Xinjian, Economic and Commercial Counsellor of the Chinese embassy to Hungary, who, reflecting upon the outcome of the summit, said that the event taking place participated by a total of 57 countries was extremely successful. So far, almost 100 countries, including Hungary among the first ones in Europe, have joined the Belt and Road initiative and 40 Memorandums of Agreement have been signed. Zhou highlighted that although the initiative was launched in China, it benefits the entire world, as the continuously constructed economic corridors are creating new opportunities and open new development spaces for the participants, including the CEE region. Regrading Hungary, the China. Hungary relations have never been more favourable throughout their history, he said, therefore it is important to take advantage of the opportunities arising from the good terms. THE PROSPECTS OF THE EU-CHINA RELATIONS ON ONE BELT, ONE ROAD (SESSION ONE) In the first session, Hou Yongzhi, Director of the Department of Development Strategy and Regional

Economic Studies, Dániel Palotai, Executive Director of the Central Bank of Hungary and Norbert Csizmadia, Chairman of the Board of Trustees of PAGEO delivered presentations. The discussion was moderated by Anton Bendarjevsky, Director of PAGEO. In his presentation, Hou Yongzhi said that the New Silk Road, i.e. the One Belt, One Road (OBOR) initiative, was launched by China’s head of state, Xi Jinping in 2013. Although there are many who have misgivings about the cooperation, facts are proving the Chinese right: over a hundred countries have signalled their intention to join, and almost 40 Memorandums of Understanding have been signed. In 2016, the value of trade between China and its partners amounted to some $9,500 billion. The One Belt, One Road initiative exerts its positive effect in several dimensions, Hou argued. On the one hand, the development of transport networks facilitates a more effective market operation and creates a more attractive market environment. On the other hand, cooperation enables more intensive knowledge-transfer, exchange of information and accumulation of knowledge among the participating countries.

“Almost 100 countries have joined the Belt and Road initiative...” The cooperation between Europe and China plays a prominent role within the New Silk Road, Hou highlighted, as the two regions exert considerable economic impact on each other. In 2015, for example, 73 per cent of all transfers in the world economy were made between these two parties. The effective cooperation of the parties may be facilitated by their different approaches, as the traditional Chinese mindset puts emphasis on ethics, while the European mindset puts emphasis on technique, thus they can complete each other well. However, talking is not enough to achieve good results; the cooperation must be further enhanced. Dániel Palotai primarily spoke about the financial aspects of One Belt, One Road. He explained that the role of Hungary on the New Silk Road is to connect the East with the West. The initiative means

an enormous economic opportunity to our country, as Chinese companies intend to significantly increase their investments in the region, and the cooperation creates a good opportunity for the expansion of Hungarian companies in China. In addition to infrastructure investments, such as the development of the Budapest-Belgrade railway, Hungary wants to extend the cooperation with China also in terms of finances, in which the Central Bank will assume a prominent role. The Chinese central bank has concluded several currency swap framework agreements with foreign central banks, including the Central Bank of Hungary in 2013. That is, the Central Bank of Hungary is also on the New Silk Road. Norbert Csizmadia, Chairman of the of the Board of Trustees of Pallas Athene Geopolitical Foundation, mainly spoke about the role that the Foundation plays in the Chinese initiative. PAGEO, with its focus on East Asia, wants to be a knowledge hub between China and Europe. In his presentation, he described the achievements of PAGEO’s Geopolitical Research Institute: among others, 384 studies and articles have been published in Hungarian and English, which have attracted almost 50, 000 readers from 93 countries; the

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Land and sea routes of One Road, One Belt

Institute sponsors numerous Hungarian, European and global events, organises its own professional events, in relation to which twenty-four worldrenowned geopolitical thinkers have been invited; and numerous books as well as the Hungarian Geopolitics (HUG) magazine have been published in Hungarian and English. The Research Institute, thanks to the work that has been done so far, has become a member of the 16 + 1 Think Tanks Network consisting of Central-Eastern European research institutes coordinated by the Chinese Academy of Social Sciences. As a special event of the Conference, the EUOBOR Institute granted the PAGEO Research Institute the Euro-Sino Economic Research Award, as a recognition of its achievements in the research of economic relationships between China and Europe. The award was handed over by Zhou Xinjian and Li Zhen, President of the EUOBOR Institute. AREAS AND CHALLENGES OF THE CEEC-CHINA COOPERATION (SESSION TWO) The lecturers of the second session of the Conference included Wang Yiwei, Director of the Centre for European Studies at Renmin University, Zhu

Xiaozhong, Professor of the Chinese Academy of Social Sciences, Gergely Salát, head of the Department of Chinese Studies at Pázmány Péter Catholic University, and Dragana Mitrovic, Professor of Belgrade University. In his presentation entitled Belt and Road initiative and the revival of civilisations, Wang Yiwei outlined the ancient Silk Road, and then he spoke about the global role and the economic opportunities of OBOR. He highlighted that China wants to share with other countries the experiences gained in industrialisation and the related economic upturn, which lifted millions of people out of poverty. This way, OBOR van exert a positive impact on the global economy. In his speech, he emphasized the importance of the New Silk Road initiative in the development of transport links. “OBOR is about interconnectivity, he said; this is a transportation network stretching through Eurasia which is also the longest economic corridor across the globe.” After the presentations given in a more or less optimistic tone, Gergely Salát spoke about the weak point of the initiative, namely the weakness of the Chinese cultural influence, and its root-causes.

THE EUROPEAN FORUM FOR BELT AND ROAD COOPERATION CONFERENCE

Turkey’s rail network

According to the university professor, OBOR does not have only infrastructure and economic elements, but also soft ones, such as education and culture. but China is less successful at promoting these in the Central-Eastern European region. This is illustrated by the fact that, according to surveys, the majority of the region’s population do not regard the rise of the Asian giant as a positive phenomenon. Among others, China’s negative perception can be contributed to biased European media, but also to historical events considered as unfavourable by the world, such as opium wars, the Boxer Rebellion or the Communist Party’s rise to power and the rise of the totalitarian dictatorship. According to Salát, if China wants to strengthen its cultural relationships in the Central-Eastern European region, aside from maintaining government support, more space should be allowed for the players of the private sectors, who – due to their profit-oriented nature – sell various “cultural products” in a professional manner. In addition, it would be important to involve local players more actively, as they can have a better understanding of the existing demand in the region. As a conclusion of the session, Dragana Mitrovic talked about the 16+1 initiative, that is that part of the New Silk Road that brings Central-Eastern European countries together. The participants laid down the

viewpoints determining the fundamentals of the cooperation in Warsaw, in 2012. The initiative was not – and has not been ever since – perceived unequivocally positively by the EU, as 11 of the 16 Central-Eastern European countries are EU Member States. But the community considers the cooperation with China as building a “Great Wall of China” within Europe. Along the 16 + 1 Cooperation, trade with China as well as the volume of investments have increased in recent years, but China’s economic ties are still much closer with Western European countries. Furthermore, trade deficit has increased in the Central-Eastern European region? China exports much more to the region than it imports from here. In this context, the question arises: can we really talk about a win-win situation? In the professor’s opinion, for the present we cannot. CentralEastern Europe would need more Chinese investments, tourists and export to strike a balance. The partner states of the 16 + 1 Cooperation have to take an active role to realise these. NEW OPPORTUNITIES OF THE CEEC-CHINA COOPERATION AFTER THE BEIJING SUMMIT (SESSION THREE) In the next part of the Conference, László György, Director of the Pallas Athene Domus Mentis Foundation, Zhao Dongwei, Director of the Department

Data flow in the world (2005, 2014)

of Institutions of the People’s Bank of China, Altay Atli, Research Associate at the Istanbul Policy Center, and Ferenc Bánhidi, Professor at the Pázmány Péter Catholic University gave presentations. As a member of the Hungarian delegation, László György participated at the Beijing summit held a week earlier. In his presentation, he reflected upon and summarised the speech delivered by China’s head of state, Xi Jinping. This year’s Belt and Road Summit can be regarded as a milestone in the history of the initiative, because the Chinese head of state declared the initial phase of One Belt, One Road has ended. But what is this new Silk Road? It is a complex cooperation process: business, political and, at the same time, civilisation project. In orderto successfully implement the initiative, China intends to act as a peacemaker in a region – Eurasia – where several wars were fought in the last decades, as the success of One Belt, One Road requires a peaceful, stable environment, this is China’s primary interest in the region. But it is an important aspect of the cooperation, László György highlighted, that China does not seek to promote only its own interests, but also listens to the countries having their own visons and recommendations, and is willing to align its activities to them.

Zhao Dongwei gave un update on the latest news and prospects of One Belt, One Road. Among others, he described how various bond market instruments promote the efficiency of the implementation of the project. These comply with international standards, eliminating the misunderstandings and conflicts between countries. The Director also talked about their risk assessment methods, which are being increasingly developed in order to keep the risk level of various developments to a minimum. In his presentation, Altay Alti, Research Associate at the Istanbul Policy Center examined OBOR from a Turkish perspective, seeking the answer to the question as to whether Turkey, often referred to as a bridge between the East and the West, can capitalise on its geographical location? The key to this is the development of transport infrastructure, since the country has considerable deficiencies in this respect. Therefore, Turkey primarily sees the One Belt, One Road initiative as a source of investments in transport infrastructure. This development of the country will have a positive effect also on international trade, as goods can get from Asia to Europe, and vice versa, through Turkey faster and cheaper than they do today. The session was closed by Ferenc Bánhidi, speaking about the infocommunications aspects of OBOR. OBOR. The topic is a very relevant one, the

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h for passenger trains and 120 km per h for freight trains. The upgrading the line is an absolute necessity as it was last renovated in the 1960s, but the question of return on investment arises (in the currently relatively under-utilised section) due to extremely high costs, which is further aggravated by the fact that so far no preliminary impact assessment has been done on the project; furthermore, the European Committee has also launched an investigation into the development. Implementation is only possible on condition that a positive decision is made by the Union. The second presentation was given by Mariann Gecse, Director for Government Relations and Communications at Huawei Hungary, during which she briefly introduced the company, China’s largest non-state, i.e., privately owned company, which is present in some 170 countries. The copany is ectremely significant for Hungary, as it is Hungary where Huawei has built its largest assembly and logistics centre outside China.

Professor argued, as, on the one hand, globalisation is being digitised and, on the other hand, the development of infocommunications infrastructure forms an important part of the New Silk Road. To support his former argument, he showed a graphic illustration of the global increase of data flow. OBOR has strategic goals concerning infocommunications technology, such as promoting network interconnection among partner states, reducing the costs of network access, bridging the digital divide within and between countries, etc. It would be useful for CentralEastern European countries to get familiar with such Chinese initiatives as the Made in China 2025 development strategy Central-Eastern European countries in order to take advantage of the opportunities offered by the cooperation, the Professor proposed. PROJECTS AND PLANS ALONG ONE BELT, ONE ROAD (SESSION FOUR) After learning about the long-term effects, possibilities and challenges of OBOR, specific plans were introduced in the fourth session, through

Anett Szabó, Head of Communications at Chinese-Hungarian Railway Nonprofit Ltd., gave insights into the details of planning the BudapestBelgrade railway and outlined the importance of the project for Hungary.

The company has three major business branches: development of network solutions (e.g. antennas), installing business solutions (servers, etc.), and maybe the most widely-known branch is the smartphone one. In Hungary, mostly the former two activities are pursued by Huawei; in addition, the company – primarily to retain its competitiveness – pays special attention to research, development and innovation. Finally, the presentation also covered the importance of Hungary as a deployment destination and the potential underlying in our advantageous geographical location.

The line is connected to the One Belt, One Road initiative through Piraeus Port, the majority ownership was acquired by China Ocean Shipping Company, COSCO (the fourth largest container shipping company of the world) in April, 2016. The goods reaching the port would be transported farther on the mainland by railway, and the section between Budapest and Belgrade would form a part of this line. The budget of the project amounts to some HUF 472-550 billion, entirely financed by Chinese loans, on which the two countries have already concluded an inter-governmental treaty. As a result of the development, a double-track line would be constructed replacing the current single-track one, allowing a speed of 160 km per

In his presentation, this topic was continued and explained in more detail by Ernő Pető, President of ChinaCham Hungary, who, among others, spoke about why Hungary means a hub. On the one hand, our country is a market hub, sue to its well-functioning banking and financial system; for example, it is at the vanguard regarding renminbi financing. On the other hand, it takes a central place within Europe, its primary market consists of ten Central-eastern European countries, and its secondary market is constituted by Germany, France and the Benelux states, as well as Ukraine and Russia. Thus, a market of 500 million people can be reached relatively quickly through our country, and this is a considerable size even on a Chinese

presenting the projects related to the New Silk Road and the activities and ideas of Chinese companies operating in Hungary.

scale. Most probably, it is one of the reasons why only two special economic zones have been established in Europe so far, and both of them can be found in Hungary. There are two more aspects that can make Hungary an attractive investment destination for Chinese companies: on the one hand, it is a Members State of the European Union, with all its advantages; on the other hand, wage levels are already below the Chinese ones in many cases.

“There are two more aspects that can make Hungary an attractive investment destination for Chinese companies: on the one hand, it is a Members State of the European Union, with all its advantages; on the other hand, wage levels are already below the Chinese ones in many cases.” In his presentation, he also spoke about the fact that China is not only a manufacturer any more, but also a significant consumer market, thus not just Made in China but also Made for China are both relevant. In relation to the economic corridors, Pető underlined that maritime routes have always been and will be the most important routes, but railway can present an alternative in many cases, as it is faster. It is more expensive than shipping, but still cheaper than air transport. Finally, the presentation highlighted the ambivalent situation of Central-Eastern European countries. On the one hand, they compete with each other; on the other hand, they are increasingly forced to cooperate with each other, as they would need to combine their production capacities to be able to produce goods in volumes sufficient for China.

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Euro-Sino Economic Research Award The Foundation was granted the Euro-Sino Economic Research Award by Li Zhen, President of the Budapest-based European Institute for One Belt One Road Economic and Cultural Cooperation and Development (EUOBOR) established in 2015, who visited the PAGEO Research Institute on 13th December, 2016. President Li had come across PAGEO via the analyses written on the topic of “One Belt, One Road” and published on the homepage of the research institute. EUOBOR recognised the study of the ancient and the modern Silk Road as an important pillar of Hungarian and European decision-making.

The EUOBOR Institute was set up as a response to the “One Belt, One Road” concept, to serve as platform for shared economic and cultural matters of the European Union, other European countries and China. The aim of the institute is to carry out research projects by involving Chinese and European tenders in order to promote the cooperation of Central-Eastern European countries (CEEC) and China (in Chinese terminology, 16 + 1, i.e. 16 CEEC and China) within the framework of One Belt, One Road. The award was granted as a recognition of the research work carried out promoting the economic relationships between China and Europe, referring to the fact that since its establishment in 2015, the Research Institute has published numerous papers centred around the “One Belt, One Road” concept and actively contributed to studying China’s economic situation and development trends in Central Europe. 86

The Budapest bureau of the Xinhua News Agency of the Chinese state has also reported on the fact that the work in the research institute of the Foundation earned a Euro-Sino Economic Research Award. The President of EUOBOR handed over the award to the leaders and collaborators of PAGEO Research Institute on 22nd May, 2017, within the framework of a scientific conference entitled European Forum for Belt and Road Cooperation. For this occasion, a high-profile Chinese delegation arrived in Budapest. It was led by Yang Zhenwu, member of the Central Committee of the Communist Party of China, and also included Wang Yiwei, Director of Centre for European Studies at Renmin University, and Zhai Kun, Professor of the School of International Studies at Peking University, former Director of the China Institutes of Contemporary International Relations. 87

PALLAS ATHENE GEOPOLITICAL DOCTRINES Presented by Norbert Csizmadia, Chairman of Pallas Athene Geopolitical Foundation at the EUOBOR event on 22 nd May, 2017

If we wish to draw and present our own 21 st-century map, the map of PAGEO, we end up with the following map, which has four main compass directions and pillars, with four main focuses and areas:

North of Thessaloniki, you can find a mountain called Paggaio. This mountain was the most widely-known and most notable, most significant gold deposit of ancient Greece. In the times of Pallas Athene and Zeus, gold had a very important connotation, as a means of creating value. What is the symbolic significance of gold, or value, today? It is knowledge, creativity, talent, people-to-people connections and technology. Pallas Athene is the goddess of wisdom, knowledge and law for ancient Greeks. She is the child of Zeus and Metis, the goddess of crafty thought and wisdom, but she was considered as Zeus’s daughter, as she was born from his father’s forehead. She inherited her wit from her mother,

and her strength from his father. The goddess was known as the patron of warriors seeking the truth. She supported several heroes, such as Perseus, Heracles or Odysseus, but she did not like any unnecessary bloodshed. She is a warrior goddess; the most frequently mentioned epithets highlighting her relationship to war include invincible, saviour of the people. Her presence in battles is rather protective, encouraging, disciplining; she is leading the people. Not only several significant inventions but also various skills are associated to the name of the goddess. In addition, Pallas Athene was the goddess of protectors of various cities, handicraft and wisdom.

• Pallas Athene Geopolitical Research Institute, a small, think tank-type research institute with a focus on Asia; • Related to education, promoting training in geopolitics, geo-economy and economic geography on university and PhD-levels; • Inviting the leading global geostrategic thinkers of the world to Hungary, and supporting Hungarian economic geographical and geo-economic workshops, institutes and researchers; • Publishing products, publications, books in such a Hungarian and international network which forms a bridge between the Far East and Hungary as well as Central-Eastern Europe. The major central element of our map is how we can become the European knowledge and intellectual hub of the 21 st-century New Silk Road and the Asian century. What kind of long-term strategy and vision connect the two regions (East Asia and Central Europe), and what role does PAGEO play in that?

PAGEO FOUNDATION – GOALS, OPERATION Pallas Athene Geopolitical Foundation was established by the Central Bank of Hungary in 2014 with the aim of encouraging the creation of geopolitical knowledge, which can promote the economic development of both Hungary and the Central-Eastern European region. Globalisation, which has accelerated by the 21st century, and its consequence, a global economic crisis affecting the whole world at the beginning of the century and the shifting economic world order increase the significance of the geopolitical discipline in terms of economic policies. Pallas Athene Geopolitical Foundation can effectively contribute with creating knowledge, analyses, establishing international and scientific partnerships, stimulating the activity of the Hungarian geopolitical scene and channelling international achievements, while also applying these results in the core activities of the Central Bank.

PALLAS ATHENE GEOPOLITICAL DOCTRINES

PAGEO RESEARCH INSTITUTE – CENTRAL-EASTERN STRATEGIC THINK TANK In those two and a half years that have elapsed since the foundation of Pallas Athene Geopolitical Foundation, we created our Geopolitical Research Institute, the experts of which have produced over 384 researches, interviews, book reviews, scholarly articles and reports. The studies of our research institute are published on our website, www.geopolitika.hu, which has been visited by fifty thousand readers from 93 countries in the first six months of its operation. We launched our English-language site in March, 2017, on which all our papers are published also in English for our international partners. PAGEO RESEARCH INSTITUTE: FOCUS ON 6 COUNTRIES OF 1 REGION If we want to learn about the future, we need to turn towards the East; not accidentally, the 21 st century is going to be the Asian Century. Recognising the growing potential underlying in the East Asian region, the Research Institute of PAGEO focusses on six countries in Asia: China and Hong Kong, Japan, South Korea, India, Singapore, and Indonesia. This is the region that has undergone the most successful transformation in the past decade and accounted for 87% of the GDP and 78% of the population of Asia in 2010. Our researchers specialise in the countries in focus and are proficient in

the language of the particular country. In addition, we seek to enhance the professional knowledge base of the Research Institute with the work of Hungarian and regional external collaborators and of scholars visiting us under the “visiting fellow program”. Our aim is to create one of the best research institute of Eastern Europe, with a focus on Asia, and put ourselves on the map of the best and most innovative research institutes of the world. In May, 2017, within the framework of EUOBOR (European One Belt One Road) initiative, our research institute was granted the “Euro-Sino Economic Research Award”, which means the best European research institute on China and the Silk Road, and we are proud of the close relationship established, and the fact that we are the first one to be consulted from China on issues related to the region. GEOLECTURES: NEW GEOSTRATEGIC GENERATIONS It is one of the most important tasks of PAGEO to facilitate education, especially to professionally support the education of geopolitics, geo-economics and economic geography. In this framework, we established our own institute, our Geo-Centre, at Hungary’s most prestigious university of economics, the Corvinus University of Budapest, where

we launched our Master’s as well as our PhD programme as an interdisciplinary meeting point of economic geography, future studies, sustainable development and within the Faculty of Social Sciences. Students of the Faculty of Social Sciences majoring in International Relations can specialise in Geoeconomy both in Hungarian and English. Professionally, we take part in and coordinate the largest PhD programme in Central-Eastern Europe called Geopolitics and Political Geography from a geoeconomic sspect, in which over a hundred students participate, and many of them choose the opportunities to connect and the future challenges related to Hungary and the New Silk Road as the topic of their dissertation. Recently, we have invited such significant global geostrategic thinkers to Budapest who gave public lectures as part of the Geolectures series, including New York-based cultural anthropologist Arjun Apparudai, and Parag Khanna, a geoeconomic thinker living in Singapore, who is one of the 100 Top Global Thinkers of the world. In the Geocentre of Corvinus University and within the framework of the doctoral programme, exciting, thought-provoking presentations were delivered by Bruno Giussani, Director of

TED Europe on knowledge sharing, by Zhang Lihua, professor at the Department of International Relations at Tsinghua University on the significance of One Belt, One Road; and by Didier Sornette, Professor at ETH Zurich on the predictability of the future, each attracting audiences of several hundreds of people. In our event called Pageo Klub invited lecturers – all of them are considered as significant global thinkers – gave presentations on the topics of their researches and their most important results. What they have in common is that they all seek solutions to the most important challenges affecting millions of people; their presentations as well as live broadcast sessions provided thousands of professionals with the opportunity to be part of an exchange of experience Our invited lecturers included American John Gerzema; world-famous, Hungarian-born physicist Albert László Barabási, a professor and researcher who worked at MIT in Boston as well, engaged in the world of networks; Mihály Csíkszentmihályi, again, a world-famous researcher of flow and creativity; Sandy Speicher partner at the IDEO Factory

PALLAS ATHENE GEOPOLITICAL DOCTRINES

LAB at Stanford University, where she also serves as managing director of the education practice; Leonard Brody, a Canadian start-up daredevil of Hungarian origins; and Noah Raford, futurist from the United Arab Emirates. The most prominent thinker of geopolitics, George Friedman – who is also of Hungarian origins – held his book launch, and the Hungarian edition of his books was sponsored by PAGEO. Simon Anholt gave a presentation on the role of good places, and David Rowan, the Editor-inChief of WIRED magazine delivered one on the new technological world order.

for the first time in its history; and of Budapest Brain Bar knowledge festival, which has been sponsored also by Google and WIRED this year, recognizing the novelty and international success of the event, which has become Europe’s most significant festival on the future. In the last two years, we have invited more than thirty international, world-renowned experts to Budapest. Within the framework of these programmes, a lecture was delivered by world-renowned economic historian and author, Niall Fergusson, Philip Zimbardo, a professor emeritus at Stanford University, Richard Florida, a professor at Toronto University, who gave a presentation on the rise of creative cities and the creative class, or Indian-born Sugata Mitra, engaged in education and innovation. The experts shaping trends in geopolitics, technology and sciences delivered presentations in front of twenty thousand people in total at various events in Budapest, organized with the sponsorship of PAGEO. These events provide the opportunities for such encounters that stimulate international relations and inspire scientific collaboration. These events have significantly contributed to making Budapest the scientific, technological and creativity centre of the region. BOOKS AND PUBLICATIONS – HUG: HUNGARIAN GEOPOLITICS

BUDAPEST STRATEGIC HUB: SUPPORTING HUNGARIAN GEOPOLITICAL WORKSHOPS, INSTITUTES AS WELL AS INTERNATIONAL PROGRAMMES Over the past two years, we have supported more than three hundred initiatives of a worth of over two million euros, which could act as the driver of the geopolitical scientific life in Hungary and of such events that have put Budapest in the global map. With the help of our aid, several Hungarian researchers could participate in international conferences and give presentations, and Hungarian research institutes, scientific workshops and centres could organize joint international professional programmes and conferences. We sponsored such events as annually organized TEDxDanubia, which invites the most inspiring thinkers to Budapest. We were the main sponsors of EUGEO, Europe’s most significant congress on geography, held in Budapest in 2015; of WOMEX, a famous international event held in Central-Eastern Europe

Since January, 2015 we have sponsored the edition of 30 books in total, the topics of which can be related to various disciplines fitting the profile of the Foundation, ranging from geography to security policy, from geopolitics and geo-strategy to economics. World-renowned geostrategist, George Friedman, earned the appreciation of the professional audience and leading decision-makers as the founder of Stratfor, with his bold conclusions and extraordinary perspective. In his work, The Next Decade, he examines whether the American empire is compatible with the republic. Which will be needed in the world of chaotic Islam, expanding Russia, gloomy Europe and vast China? In his bestselling book, The Next 100 Years, which provides a broader chronological outlook, he writes about the possible future transformation of our world with scientific accuracy, but with the props of fiction. His book, Flashpoints, is an exciting lesson on history, and also a frightening forecast on the social and political fractures of our continent and their impact on the rest of the world.

HUG: Hungarian Geopolitics HUG (Hungarian Geopolitics), the Hungarian and English magazine of the PAGEO Research Institute was launched in March, 2016. It is Hungary’s leading magazine on geopolitical and geostrategic topics. The goal of the magazine is to present our rapidly changing world, the importance of the geopolitical approach, the effects on new technologies on our everyday life and the rise of Asia to interested readers to a high professional standard but in a readily comprehensible manner. Our authors include Hungarian and international experts, world-famous professors and the representatives of the new generation of researchers, who have all undertaken to collect and present the morsels of information that are dispersed in several places in the world but are parts of an integrated whole. The first issue of HUG, published in the spring of 2016, examines the new geopolitical, geostrategic and geoeconomic trends of the 21 st century, dwells on mapping our multipolar world order and pays special attention to distribute geopolitical thinking. The second issue of HUG examines the topics of discovering creativity, knowledge, technology and the transformation of education, and seeks the answer to the question as to what challenges future schools will have to face. The third issue of HUG focusses on China’s ambitious vision of foreign policy, the New Silk Road. It describes the process how the ancient Silk Road came into being, and its relationship, from historic times up to these days, with the particularly important economic and infrastructure project of our age, the New Silk Road, in which Hungary can also be given an important role. The fourth issue of HUG focusses on the transformation of technology, and on the nodes of the new global network, i.e. cities. It explores how infrastructure is transforming space, may it be the Trans-Siberian Railway or China’s high-speed rail transport. It examines how cities are becoming increasingly smart

and how their significance in terms of world economy is growing, owing to the technological revolution. The fifth issue of HUG seeks answers to the future transformation of the world, through the concepts of the world order by great thinkers and through scenarios and visions on the mid-century. And the latest, sixth issue is about the great change of era, exploring the interrelations between growth, knowledge and technology. GEOFUSIONAL MAPS – NEW WORLD ORDER ON THE BRINK OF THE GREAT CHANGE OF ERA AIn addition to my work at PAGEO, my book, Geopillanat – literally translates as Geomoment – was published in November, 2016, which compiles the professional results of the last five years in one single volume with a hundred interesting maps and infographics. The book is a special professional guidebook with the help of which we can discover the new world order of the 21 st century and the world around us with the help of geography, drawing a new geopolitical and technological map of the era. I am particularly pleased about the fact that the book was voted as one of the top 25 most significant and best specialized books in Hungary in May, 2017. The book will be published in English entitled Geofusion in the autumn of 2017. In order to understand what is happening in the new multipolar global arena of the 21 st century, we need to focus on four priorities. The first one means that we are witnessing the rise of geography, and we are living in a geoeconomic era aside from geopolitics, in the age of networks and fusions, where a new great change of era has begun with the help of technological advancements and fusional meeting points, in which the era and the places, therefore geography as such, have a prominent role. The task of 21 st-century explorers and geostrategists is to give guidance on a world full of global economic and social challenges. New maps are required, which incorporate

PALLAS ATHENE GEOPOLITICAL DOCTRINES

the wisdom and the tools of the old ones, but are complemented by today’s knowledge. We can give an answer to the question as to how we can anticipate global processes on the basis of the latest interrelations between geography and economics. The main question of the book is who the winners – nations, leaders, communities – of this special geo-moment will be. Will they be the small ones or the large ones; the strong or the fast; centres of peripheries? Countries possessing knowledge, i.e. knowledge-intensive economies located in the old peripheries may be the new landmarks. It requires new perspectives, extensive knowledge and creativity. At the Tacitus Lectures event held in February 2016, Paul Tucker, former Deputy Governor of the Bank of England said that such nations and countries would be competitive which aligned their monetary and economic policies with their geopolitics. The beginning of the 21 st century, and especially the 2008 economic crisis created a new world order, a new value system, with new participants, new cooperations, new places; former centres got to the periphery, and former peripheries became centres.

Earlier recipes and dogmas have failed; we need a new mindset and new methods. The 21 st century is the era of knowledge, talent, technology and innovation, the currency of which is genuine ideas and innovations. After the age of globalization, the age of technology has set in, and it is a major question as to what role places will play in this technology-driven age. If we merge technology, knowledge and geography into one word, the main question of the book is how to navigate in the age of tech-knowled(ge)ography. GEOGRAPHY IS A TOOL TO EXPLORE THE WORLD Geography does not just mean memorizing places on our maps, but the familiarity with and the knowledge of geography implies a complex exploration of the world. In his book, The Revenge of Geography, Robert D. Kaplan argues that we may forget about the power of geographical factors but they do not cease to exist. Even technological development is incapable of it, although many have thought so; technological development has not brought about the death of geography, but attributed a higher value to the significance of geography.

PALLAS ATHENE GEOPOLITICAL DOCTRINES

In order to understand how the world works, we need maps. Maps were important in the past and still are so in the present. We have already got used to our maps, but it is important to view the from a new perspective. In 2015, China redrew the world map and the relationships of continents. The starting point of the new Chinese map is that we do not have to bypass the Pacific Ocean and the Americas to get from New York to Beijing or Shanghai, but the shortest route goes through the Arctic. Therefore, let’s have a look at the layout of our world map if we place America not the East but the North of the Asian continent. Or, another significant thing, that these maps do not separate Europe from Asia, since Europe is also a part of a single supercontinent. Again, we end up with different kinds of maps if we do not use countries, but cities, hubs, points of connectivity, regions, knowledge ports, or a Facebook map based on networks, or the destination maps of various airlines. Today, there are 500,000 kilometres of borders; the length of undersea Internet cables is the double of that, one million kilometres, the length of gas pipelines is the double of that, some two million kilometres of, and again, the length of existing railway lines is some four million kilometres, and, in total, there are 64 million kilometres of roads on the maps. This is another reason why it is China’s long-term strategy to connect the Easter and the Western ends of the supercontinent with the One Belt, One Road initiative, and with the most important and most significant investment of the 21 st century, create the opportunity to shift the main arteries of world trade from seas to the mainland. It intends to regain its former historical, cultural, economic and commercial significance by rebuilding the New Silk Road. It is not a co-incidence that up to date 64 countries have joined the One Belt, One Road initiative (plus two other countries this year), and it is not a co-incidence that with building the New Silk Road, China provides Hungary with a considerable role, as three Silk Road networks meet at Hungary. The Silk Road used to be important throughout history because it transported the most important technological innovations and knowledge of the age, and quality products were exchanged. For China, the greatest achievement in Europe is the 16 + 1

Cooperation, and the fact that Hungary can host the 16 + 1 summit in November, 2017, also has significance. AGE OF GEO-ECONOMICS It is a major geo-political element of the 21 st century that a new, multi-polar world order is emerging from the former, mono-polar one. It has three main protagonists: the United States, China and Russia; and two supporting characters: Germany and Turkey. Geo-economics, as a fusional meeting point of economics, social sciences and geography, determines the processes of world economy. At the moment, we are witnessing the rise of geoeconomics; a competition taking place in the language of commerce but according to the logic of wars. Geopolitical competition transforms global economy, the global balance of power and governance. New cooperations, new systems of values, new players, new strategic agreements. Former peripheries can become centres again in the future. The developments of the New Silk Road will make Central-Eastern Europe rise from being a “buffer zone” to a “bridgehead region” WE LIVE IN THE AGE OF FUSIONS – THE GREAT CHANGE OF ERA In the 21 st century, knowledge and technology play the main roles. We live in a world of networks, in which we cannot know which are the areas the meeting point of which will generate a new one, what fusions can give birth to a new discovery, a new creation. Also, the most important map of the 21 st century, the map of Internet, consists of networks and hubs. In this fusional, geo-fusional age big data will be the raw material of the 21 st century; knowledge, creativity and experience will be the services. With new participants and from new co-operations, the small ones will become giants, as start-up companies, start-up cities and start-up nations have demonstrated. In a new Cambrian moment, we are witnessing a new technological-entrepreneurial revolution. It is complexity that is underlying fusions and networks. A study, Atlas of the Economic Complexity, prepared by Ricardo Hausmann (Harvard University) and his research team, considers the products that each country exports in their economic structure.

With the help of the study, he concludes that two things are important for development: knowledge with a high added value and products that can join the global network of products. On this basis, he established a new, subjective ranking of competitiveness, and the TOP 10 include Asian and European countries (Japan, Hong Kong, South Korea, Singapore, Finland, Germany, Switzerland, Poland, the Czech Republic, Hungary, Slovenia). Compared to 2011, Hungary has improved five places, currently being No. 8. While the past centuries were about the age globalisation, in our current decade we talk about the age of technology. The most significant businesses of the world are not oil companies any more, but technological enterprises: Apple, Facebook, Amazon, Google. Cities and megacities, where the creative class live, learn and create, have a very important role. Today, 40 global megacities of the world account for 80 per cent of global GDP. Cities and small countries that can swiftly react to the challenges of the new technological age are going to be the new centres of power of the 21 st century. It is an important question as to how Hungary and Budapest can be the winners of the next era and the next decades. In a geoeconomic era that builds upon networks and fusions, and in which knowledge, creativity and innovation are considered as the most important resources. In an era the most important investment of which is building the New Silk Road, which does not mean only an infrastructure network but also a network of products, intellectual products, cultural values, knowledge centres and educational cooperations. How can Hungary as part of Europe become the knowledge and intellectual hub of the New Silk Road region? By mediating and connecting well-functioning institutions, relationships, value systems, knowledge networks. The decision-makers of the 21 st century will be the ones who are able to view the world with geopolitical insights and dare to redraw the maps. The leading companies of the world are developing an ever closer network with Eastern Europe, India and Southeast Asia, to update their portfolios with the creativity of small start-ups. In the meantime, China is building the modern Silk Road crossing the Asian continent from the East. The directors of technological giants are paying more and more attention to global social issues. Science has also

turned towards geopolitics: urbanism, territoriality, sustainability and social geography are also included in the economic and leadership studies of the University College London. In 2015, Stanford launched its global executive programme of $700 million USD, seeking answers to economic-social questions, globalization and technological challenges. At the Faculty of Social Sciences of the National University of Singapore, Asia’s best university, economics is complemented by geography, communications theory, psychology and political science. The world’s leading economic, political and knowledge centres intend to redraw the maps of the world, adding their own interpretation kits and legends to them. These metropolitan areas and regions (Boston, San Francisco, Bangalore, Singapore…) aspire to become such hubs that are inalienable from the data, knowledge and innovation networks influencing the decisions of the world.

“It is an important question as to how Hungary and Budapest can be the winners of the next era and the next decades.” Ultimately, it is always people and the decisions of people that we find behind geopolitical turning points. And those will be the decision-makers, economic, political, scientific and technological leaders of the 21 st century who are able to comprehend global connections and create hubs of creativity and information flow around them. Those who are brave, curious and creative enough to draw strength from crises and to reconsider the role of spatiality in global decision-making. Those who are seeking fusions and new border areas, may they be physical, natural or scientific. Those who build personal networks with other hubs and draw strength from the exchange of experiences with other cultures. This is another reason why China’s appreciation through the EUOBOR Euro-Sino Academic Research Award, which is an important milestone in our joint upbuilding, is so important for us.

THE GEOGRAPHY AND GEOSTRATEGISTS OF THE NEW SILK ROAD ECONOMIC BELT

GEOGRAPHY, ECONOMY, STRATEGY

GEO Institute at the Corvinus University of Budapest Author: Géza Salamin, Márton Péti

How will special and urban development and planning become a tool of economic development? What space-shaping strategies are forming and dominating in Asia and Europe? How are the roles of different regions of the world being rearranged? What aalternatives to current economic thinking exist, and what is an environmentally-friendly economy like? Such questions, often seeming still unusual at first, are addressed in both education and research by a workshop of the Corvinus University of Budapest, the Institute of Economic Geography, Geoeconomy and Sustainable Development, informally abbreviated as the GEO Institute, which has been reestablished recently but has considerable traditions owing to its predecessors.

In Volume 2016 issue 1, HUG Magazine briefly reported on the new organisational unit established at the Corvinus University of Budapest, which placed the emphasis on strengthening the role of geography in training courses in Economics. In July, 2015, the University concluded a strategic cooperation agreement with the Central Bank of Hungary, covering student grants, researcher mobility, the establishment of a new department at the Faculty of Economics as well as stimulating education and research in geography and geostrategy. By presenting the revamped organisational unit and its results, our article tells the story of how an old institute founded by Pál Teleki in the early of the 20th century – by cherishing its values – can give birth to a 21 st-century creative, strategic workshop. GEOGRAPHY AND SUSTAINABILITY– ON ECONOMY WITH AN ALTERNATIVE APPROACH If the uniqueness of the GEO Institute must be briefly summarised, we could say that it seeks and collects the novel and alternative approaches to thinking about economy, and offers practical knowledge to the new generation in this

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perspective. Economy from the viewpoint of sustainability, society and community, environment and culture, globality and locality. The mission of the Institute is to provide geographic, regional scientific, spatial and urban development knowledge required for exploring and managing regional, futurological, geostrategic and environmental features deriving from spatial and territorial existence, both in education and research, within the framework of business, economics and social sciences programmes within the current academic training structure. It is based on a multi- and interdisciplinary approach to science, building on cooperation. The institute places great emphasis on the inclusion of young people; demonstrators and PhD students of the Institute are important figures of the workshop. This way, a broader circle of students and doctoral candidates make its team of almost twenty members a diverse, creative professional community. The thematic focuses of the institute include geostrategy and geopolitics, development policy and urbanism, and primarily their international dimensions.

Methodologically, the focus is on public policy planning and management primarily in a territorial dimension, which requires completely new approaches and toolkit in the 21st century. From an economic perspective, the role, development and planning of cities will definitely be more important. The Institute is committed to being the first workshop of urbanism and spatial planning based on economics and social sciences, which already remarkably manifests in the training content, the international relations and role of the Institute. NEW, STILL OLD: FROM TELEKI’S INSTITUTE TO THE GEO-STRATEGY CENTRE Although the GEO Institute was established in its present form at the University in 2015, it provides new, integrated organisational frameworks for renowned workshops in related fields. The legal predecessor of the Institution is the Department of Economic Geography, which is one of the most prestigious and renowned founding departments of the Corvinus University of Budapest and its predecessors, but also the Department of Environmental Economics and Technology founded in the 1980s as well as the Future Studies community dating back several long decades continue their operations within the Institute. The Department of Economic Geography was one of the first organisational units of the University of Economics established in an autonomous form 1948. The Department was founded by Pál Teleki at the Faculty of Economics of the Royal Hungarian University, which was established in 1920 and is regarded as a predecessor of the university. Although history remembers his undertakings in politics and public administration, for science Teleki was a noted geographer of his time, a world-famous figure of economic geography, who established a new school of thought. Not only was Teleki the first leader of the Department of Economic Geography, but he also organised the predecessor of the Corvinus University of Budapest, i.e. the Faculty of Economics of the Royal Hungarian Science University, and also led it as its Dean. The current portfolio of the GEO symbolizes the scientific and professional legacy of its founder. Teleki and the workshops founded by him did a lot for systematically pursuing governmental and public administrational background activities as

well as planning and analysing ones. Furthermore, his work also had an environmental science aspect. The matter of practical geopolitics has been also present here from the beginnings, as the preparation of the first map of ethnicities (“red map”) in 1918 is associated with the name of the founder, Teleki. He was the first to make geographic and spatial information recognised and indispensable in the university training courses in Economics in Hungary. He recognised that the knowledge of geography, of the spatial distribution of productive forces and environmental interactions are an absolute necessity for economists. Futures studies – uniquely in the university sector in Hungary – has been present in an institutionalised form at the University since 1968, when it appeared as a centre and then, since 1989 it has been operating as an independent Department. The Department of Environmental Economics and Technology, representing the predecessor of the Centre for Sustainable Development of the GEO Institute was set up in the 1980s, and in Hungary it has become a prominent base for the research and education of combining environmental and economic aspects. Since their establishment, the workshops of the Institute have been fostering a close relationship with practice, the design and planning of socialeconomic and environmental structures, relevant policy-making, and took part in important planning and decision-shaping activities. This direction could fully evolve since 2016, when, owing to an agreement between the Corvinus University of Budapest and the Central Bank of Hungary, practitioners of development policy, economic strategy and urbanism incorporating their experiences gained in Hungary and abroad in education and research could join the Institute. REGIONS, CITIES, DEVELOPMENT AND GEOPOLITICS – NEW AND RENEWING EDUCATIONAL PORTFOLIO The new Institute quickly developed a significant new educational portfolio, thanks to both the involvement of practitioners and the positive cooperations of the host faculty. First, the Regional and Environmental Economics MA programme – on which enrolment at the Corvinus University of Budapest had not been possible for three years – was comprehensively renewed and re-organised. As a result of the development concerning 60 per cent of the training

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GEOGRAPHY, ECONOMY, STRATEGY

Corvinus University, Budapest The majority of students take part in the diverse research and educational development programmes of the institute. With the help of the sponsorship of the Central Bank of Hungary, a total number of thirty students could attend conferences, summer universities related to their studies in the last two years. As for the latter ones, the summer university of FUDAN University must be highlighted, which was attended by two groups of ten students each at two different occasions. ONE GLOBAL FACULTY, INTERNATIONAL DOCTORAL PROGRAMME

content of the programme, a practice-oriented training course providing planning and management skills was created, which specialised on development policy, cities and geostrategic-international dimensions among the similar training programmes of the country. Its success is demonstrated by the fact that the university has soon become a market leader in the country with this MA programme. An MA programme is planned to be launched also in English in September, 2018, extended by such knowledge that provides foreign students with insights into the economic and social systems of the European Union, CentralEastern Europe and Hungary as well as trainee opportunities. Apart from the MA programme, within the framework of a cooperation within the Faculty, two BSc programmes with elective specialisations have prominent roles. The Geopolitics specialization can be chosen by International Studies BSc students, while the Regional and Settlement Development specialization can be chosen by Sociology BSc students. The Central European Urbanisation course, which proved to be very popular as soon as it had first appeared, has been launched, among others, for the foreign students of the University,

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In addition, the Institute takes part in the other programmes of the University with several subjects on environment, economics and geography. THE APPLICATION OF NEW METHODS IN EDUCATION One of the strategic missions of the Institute of Economic Geography, Geo-economics and Sustainable Development is to provide its students with a practice-oriented training programme, which guides them through to the world of work. The students are active participants of the programme from the very beginning, as they are supposed to fulfil most of their tasks in teamwork. Classroom sessions are often replaced by fieldwork or study visits. Thanks to the extensive professional and international contact network of the Institute, it offers trainee opportunities and operates a mentoring programme, and not only within the boundaries of Hungary. Furthermore, within the framework of the ERASMUS programme, study visits are available at several European educational establishments and even traineeships at companies and institutes.

The Faculty of Social Sciences and International relations, which constitutes the immediate environment of the GEO Institute, is becoming a more and more international player, which is also indicated by the fact that the international dimension has appeared in its name recently, and it has been recruiting a growing share of its students from abroad. At this faculty, the global economic and geopolitical focus has been recently strengthened by integrating the Institute of World Economy into this organisational unit in 2015. Together with the institute of International Studies, Hungary’s most significant university faculty engaged in global issues has come into being, building upon fundamentals of economics, social sciences as well as geography. This trend is further enhanced by a new doctoral sub-programme in geopolitics, launched by the International Relations Multidisciplinary Doctoral School, operating within the framework of the Faculty, and the GEO Institute. A specific feature of the new programme is that it involves three Hungarian universities in the implementation. Its very first announcement attracted considerable interest, as, after the entrance selection process, three foreign and six Hungarian students started the first academic year in September, 2017. FUTURE STUDIES AND PLANNING IN THE 21 ST CENTURY –ON THE ROAD TO THE EASTERNEUROPEAN WORKSHOP OF PLANNING It has perhaps never been so necessary for a country, a region or a city to give well-organised strategic responses to processes shaping its development as it is today, in the age of globalisation and a shifting world order. It requires conscious, systematic,

future-oriented thinking, and the corresponding alignment of policies and actions, that is, planning, both on national, regional and local scales. It is a widely accepted interpretation that planning is a social technique of shaping the future, which can be placed in the intersection of scientific activities, practical management-administration and governance activities. In Hungary, due to professional scientific antecedents and historical reasons related to social organisation, the currently existing profession of planning in a social-economic and spatial sense, or a similar system has not evolved. Despite the existing processes and tasks taking place in practice – on a national level, on an urban and regional scale, as well as in geopolitical and international dimensions – no unified professional approach has been developed in the countries of East-Central Europe yet. The planning workshop function of the Institute is grounded on several unique elements. Corvinus is the only Hungarian university where a workshop dedicated to the education and research of futurology is present, in the GEO institute. This scientific basis and the fact that the collaborators of the Institute include key figures of such strategic planning processes as the Hungarian programming of the cohesive political period from 2014-2020, the creation of Hungary’s concept of regional development in 2005 and 2013, the creation of the Growth Plan in 2012, or the Territorial Agenda of the European Union determining the regional policy of the EU, make the Institute unique. (The team is also reinforced by the current and a former Vice President of the Hungarian Society for Urban Planning.) This firm commitment is also embodied in the ever-expanding selection of training courses related to planning and management. All this forms an important part of the strategic goal of the Institute to become a prominent, scientific-educational planning workshop of the CentralEastern European region. A decisive step towards this was that the Institute was the first one in Hungary to become an associated member of AESOP (Association of European Schools of Planning), an association coordinating workshops running training programmes or courses in planning, in July, 2017, and the Regional and Environmental Economics MA programme has been registered by the Association as an official European programme in planning.

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STRATEGY AND GEOGRAPHY IN UNDERSTANDING THE NEW SILK ROAD

BCE Geocenter

Research in Geostrategy at Corvinus University Author: Márton Péti – Géza Salamin

The “New Silk Road” initiative of the People’s Republic of China, announced in 2013, also known as “One Belt, One Road”, marks a new era both in geopolitics and geoeconomics. The ambitious attempt to rearrange the monopolar world order might reshape the opportunities of Europe, including Hungary. Recognizing the significance of the subject matter, a Silk Road Research Team was set up at the Corvinus University of Hungary, coordinated by the Institute of Economic Geography, Geoeconomics and Sustainable Development and funded by the Central Bank of Hungary.

The term ‘Silk Road’ was first used by world-renowned German geographer, Ferdinand von Richthofen in 1877. The name designates the medieval trade routes on land and sea connecting East, South and West Asia with Europe and North Africa. Based on these historical traditions, Xi Jinping, President of the People’s Republic of China, announced the New Silk Road programme, later dubbed as the “One Belt, One Road - OBOR” strategy (Yi Dai Yi) in 2013, with the explicit aim of laying new foundations for the relationships between China and the Eurasian continent. Practically, the One Belt, One Road initiative sets out developments and networking concerning Eurasia and, in some aspects, Africa, thus the entire old world, with special regard to the construction of continental and maritime transport corridors. It is an important turn of events in itself that China as a major power challenging the monopolar world order officially expresses its global ambitions. Viewing from Europe, the fact that after long historical eras – it is a matter of approach whether after long centuries or decades – a power outside the Atlantic

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Area enters the global scene with a realistic global geostrategy is an even more significant change. Furthermore, this time it is not a player adopting also patterns of European and Western civilisation such as the Soviet Union or Russia that seeks to build relationships and gain influence over the others also on the European continent, but a major power absolutely detached from the cultural area of Western civilisation. This is a historic change, which was heralded by a range of experts some time ago, and has been present even in public opinion, still, it is extremely exciting to be living it. For the present, China as a developing and investing power is still not widely-known in Europe, and neither are all details of its intentions. Understandably, China’s actions trigger reactions full of helplessness and fear in many cases, especially among European players. At the same time, it is also clear for everyone that the large-scale Eurasian developments proposed by the Asian initiative imply enormous opportunities, too. Therefore, it is worth preparing as much as possible for this new situation and the opportunities, but also for the risks that it implies.

The position of Central-Eastern European Member States of the EU, including Hungary, might become all the more important in this new development initiative. Most meeting points of the East and the West – reinterpreted by the New Silk Road initiative – can affect this region. In addition, the Eurasian scale is not unknown in this region, as the relationship fostered with the Soviet Union for decades under duress also promoted that. Due to its geographical location, Hungary can fulfil an important role; it is not a co-incidence that several Hungarian geoeconomic intentions can be related to the New Silk Road (see e.g. the Opening to the East intention in foreign economy), even specific projects and trade agreements can be identified. The small countries of a region with a turbulent history, torn between major powers, but especially Hungary, should approach any global power aspirations with caution. Despite China’s official communication, low-keyed as usual, it is obvious that the initiative serves China’s interests. Hungary should be well-prepared when approaching the specific investments and development opportunities slowly unfolding within the framework of the initiative.

Hungary was to explore the effects of the New Silk Road initiative on Hungary. The research work done so far has unfolded both in terms of exploring the geostrategic intensions related to the New Silk Road initiative and defining the structures of the “New Silk Road Economic Belt” as geographical space. Furthermore, in order to make the intentions and goals launching the New Silk Road initiative as clear as possible, specific current social, economic and even environmental policy processes of China, the major power initiating it, have been examined.

The research conducted was initiated by a workshop with considerable traditions due to its predecessor institutions, but founded only in 2016 in the present form at the Corvinus University of Budapest, and was coordinated by the Centre for Geostrategy of the Institute. The main motivation of the research undertaken within a cooperation between the Corvinus University of Hungary and the Central Bank of

The results of the researches were published in two books: the Geographical Dimensions of the New Silk Road Economic Belt (ed. Márton Péti et al.) and the Political Systems of the New Silk Road Countries (ed. László Csicsmann et al.) have been published. The present issue of HUG is presenting some results of the research, and specific chapters of the former book in an edited form.

The Institute puts great emphasis on the renewal of educational methodology, and practice-oriented training (“learning by doing”). For this purpose, the students of the Institute have been involved in the research. The Institute for International Relations of the Corvinus University of Budapest has also assumed an active role in the project. Its research team has prepared the cadastres and an analysis of the political systems of the countries in the Silk Road zone.

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ECONOMIC GEOGRAPHY OF THE NEW SILK ROAD BELT

The Corridors and hubs of the New Silk Road Economic Belt, and the economic corridors dominating in China’s Eurasian neighbours and passing through the Silk Road Belt

Author: László Jeney, Ágnes Varga

The Silk Road is the most widely-known historical overland trade route of mankind, which, over time, has become the symbol of connecting the cultures of Western, Central and East Asia. Today, the countries lying along this trail have intensifying relationships among each other, making the notion of the Silk Road all the more important. A fundamental question that arises is whether the Eurasian trade relationships from West to East in the early 21 st century can form the concerned group of countries into a real belt, that is, whether the Silk Road Belt actually exists. If it does, how will its position in the world economy and the spatial structure of its internal economic development change?

“ONE BELT”: FROM THE HISTORICAL SILK ROAD TO THE NEW SILK ROAD ECONOMIC BELT Beyond doubt, the most important criterion of defining – and dubbing – the Silk Road Belt geographically is that it is the area substantially affected by the Silk Road. The Belt encompasses the regions the socioeconomic development of which could or can be affected by the trade route in the past or the present. The geographical notion of the New Silk Road Economic Belt springs to life in the One Belt, One Road (OBOR) strategy, announced by China’s President Xi Jinping. The newly determined economic routes or corridors of the initiative appear in multiple tracks (Figure x), just as in the case of the historical Silk Road. Primarily, three continental corridors are discernible – a northern, a central and a southern one – stretching more or less from the East to the West and connecting Europe and Asia, and they are linked by secondary routes. It is true for all three primary corridors that their endpoint is not the old capital, Xi’an, they are more eastward than that, and the majority of the routes reach as far as the coast. Although the Western endpoints of the three corridors are port cities located in Europe (Helsinki, Rotterdam, Calais) or in the gateway of our continent (Istanbul), the

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OBOR strategy catalyses China’s presence in the Western and Central Asian region, interesting for Europe as well, by developing the transport, energy and telecommunications infrastructure, and thereby enhances economic integration within Asia. The four primary hubs of the New Silk Road Belt in Asia include Beijing, Astana, Karachi and Tehran. The central corridor of the New Silk Road Economic Belt running across Central and Western Asia more or less covers the traditional trails of the Silk Road, but it branches east of Xi’an towards Lianyungang and Shanghai. In Europe, it reaches the coastal region of the Atlantic Ocean at Calais, via the Balkan Peninsula, Budapest and Paris. The northern corridor directly connects China’s present-day capital, Beijing with Europe, via Kazakhstan. It splits into two at Moscow, with one branch going forward towards Duisburg and then towards the port city of Rotterdam, and with the other branch at Moscow towards Helsinki. The southern corridor also has a double end in Asia, just like the central corridor does: Fuzhou and Canton (Guangzhou). The route reaches Kashgar on a southern trail, and crosses Pakistan all the way to the port of Karachi, then runs across Iran, where it unites with the central corridor and reaches Istanbul.

(abbreviations: A. = Almaty, Asg. = Ashgabat, Buh = Bukhara, C. = Calais, D. = Druzhba, Duisb. = Duisburg, Dus. = Dushanbe, K. = Khorgas, Rott. = Rotterdam, Szakaim. = Sakaiminato) Source: Based on maps on the home pages of China Investment Research and HKTDC, edited by Ágnes Varga

The secondary routes linking the three corridors connect, on the one hand, Astana, Kashgar, Beijing and Chongqing with the central corridor, and, on the other hand, create a link towards South Korea and Japan. In the latter case, partly continental, party maritime routes branching from Beijing connect the major port cities of the region on the Beijing – Tienjan – Incheon – Tonghe – Sakaiminato – Osaka/Kobe – Shanghai trail. There are maps depicting other Eurasian continental trade routes as well. One of them is that of the six economic corridors around China, which are often referred to in specialised literature; four of them overlap with the Silk Road Economic Belt. The four

economic corridors well fit the primary trade corridors outlined above. The longest route that can be perhaps perceived as a main or spinal axis is the so-called New Eurasia Land Bridge Economic Corridor, which combines the northern and central corridors described above. The peoples living here typically speak Sino-Tibetan (Chinese and Tibetan), Altaic (Japanese, Korean, Mongolic and Turkic), or Iranian (Afghan, Balochi, Kurdish or Pashto) languages. In this respect, the Silk Road has a dual character, which, at the same time, designates the two major macro-regions. One of the macro-regions, East Asia, is the home of

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ECONOMIC GEOGRAPHY OF THE NEW SILK ROAD BELT

Interrelations between the corridors of the New Silk Road Economic Belt and the economic corridors dominating in China’s neighbours

China’s economic corridors passing through the Silk Road Belt

Land routes of OBOR

ChinaMongoliaRussia EC

New Eurasia Land Bridge EC

ChinaCentral Asia-western Asia EC

China-Pakistan EC

Beijing-OmskChelyabinsk

UrumqiAstanaRotterdam

Northern Corridor

Central Corridor

LianyungangUrumqi

Other routes

MoscowHelsinki ShanghaiXuzhou

UrumqiIstanbul

Southern Corridor

IstanbulCalais

KashgarGwadar

FangchengKantonUrumqi GwadarIstanbul Astana-Almaty/ Tashkent

Secondary Routes

UrumqiKashgar

BeijingTsungking KashgarSamarkand Beijing-KoreaJapan-Shanghai

Other Routes

BeijingMoscow

Tashkent-TejenBaku-Tehran Meshed-KabulIslamabad

Countries Concerned

Mongolia

Source: Drafted by the authors

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Iran, Kyrgyzstan, Tajikistan, Turkey, Turkmenistan, Uzbekistan

China Kazakhstan

Pakistan

Afghanistan, Azerbaijan, Hong Kong, Japan, Korea, Macau

peoples basically belonging to the Mongoloid race anthropologically. The range of countries of the region is relatively easily identifiable. East Asia represents the scope of the Chinese culture, where dominant religions focussing on the moral teaching of worldly life include Buddhism, Confucianism, Taoism, which together constitute Universalism; in addition, Japanese Shintoism and various local religions must be noted. In relation to religion, several other similarities can be detected (philosophy, arts, architecture, the Chinese calendar and writing). For a long time, Chinese script was official also in Mongolia, the Japanese and the Koreans still use classical Chinese characters, even though

changed over the past fifty years. The gradual economic intertwining within the region started in the 1980s when an increasing number of investments were relocated from the Japanese industrial conglomerates to South Korea, Hong Kong and Taiwan by Japanese multinational companies, due to remarkably increased wages and real estate prices. By dismantling economic ideological boundaries, economic development picked up and affected China as well. East Asian countries have gradually removed customs tariffs, quotas and other trade restrictions imposed on each other, set up special economic zones, where world-class logistics centres were established in ports and at airports. By

their languages have a different script (the Korean alphabet has had twenty-four letter since the 15th century). The historic, well-organised civilisations of East Asia, with their peculiar cultural and social values as well as their economic policies stimulating industrial export, could successfully join the world economy of the third millennium.

now, China has become the most important trading partner of Japan and South Korea, and this region accounts for more than fifty per cent of its dynamically growing imports. The intraregional trade of East Asia roughly equals with that of the European Union, in which internal traffic expands faster than towards other cultural regions. Two-thirds of foreign capital investments, as well as technological transfer lately, especially in key export industries such as electronics, come from within the microregion. Over past decades, East Asia, consisting of countries that used to isolate themselves even from each other, has been turning into a more and more tightly integrated economic region.

The four East Asian nations forming their states include the Japanese, the Chinese, the Koreans and the Mongolians, but many more nations live in a subordinated position in this cultural region (e.g. Tibetans, Uyghurs). It is a geopolitical feature of the region that despite its four nation-states, due to the “doubling” of China and Korea, East Asia is divided into six states, and the area marked by state borders is larger than East Asia in the narrower sense of physical geography. Apart from Mongolia and Japan, Korea and China are divided into two states each: South and North Korea, and (Mainland) China and Taiwan. (Not mentioning the fact that Hong Kong and Macau also used to form separate Chinese units; the former returned to China from the United Kingdom in 1997, and the latter from Portugal in 1999, and both have become China’s special administrative regions.) With China’s conquests, the current state borders also encompass more westward areas in Central Asia in addition to East Asia. Thus, political East Asia includes Buddhist Tibet, and the territory of a nomadic Turkic ethnic group practising the Islam, the Uyghurs, i.e. the Xinjiang-Uyghur region. The policy of conscious isolation lasting for centuries, a common characteristic of East Asian states, was not pursued only against European colonisation, but also against each other. It has considerably

“Thus, the Silk Road Belt means the middle latitudes including West and Central Asia as well as East Asia located in the middle latitudes.” The other major macro-region consists of Western and Central Asia, which constitute an even more compact geographical unit. If we want to define it, its most characteristic features include the dominance of the Islamic religion and non-Arab ethnicities, and growing economic integration also has a key role. Naturally, the population of Western and Central Asia is far from being identical with those

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1.5 billion Muslims accounting for almost a quarter of the world’s population who form the second largest religious group in the world after Christianity. The countries of Turkish and Iranian (Turanian) peoples living in the region are separated from the Arab World encompassing Southwest Asia and North Africa, and some other, more distant countries with significant Muslim communities. There are Jewish and Christian communities of significant sizes within Western and Central Asia as well (e.g. in Azerbaijan, Kazakhstan or Turkey). Western and Central Asia are only more or less a synonym of the geographical notions of the Middle East or Near East. Ethnically and linguistically, the region can be divided into two major distinctive units: Turkish and Iranian. 1.) T he Turkish and related peoples (Azeri, Kazakh, Kirgiz, Turkmen, Uyghur and Uzbek) live in Asia Minor and in Turkestan in Central Asia (Azerbaijan, Kazakhstan, Kirgizstan, Turkey, Turkmenistan and Uzbekistan). 2.) T he countries (Afghanistan, Iran, Pakistan and Tajikistan) of peoples speaking Iranian languages (Afghans/Pashtuns, the Baloch people, Kurds, Ossetians, Persians and Tajiks). The ten countries of the Western and the Central Asian region are integrating with each other ever more tightly. The Regional Cooperation for Development, RCD, evolved as early as 1962. In 1985, its successor, the Economic Cooperation Organization, ECO, was renewed by three founding members, Iran, Pakistan and Turkey. The organisation has been operating with the current number of members since 1992, when seven new countries (mostly former Soviet republics in Central Asia), Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan joined. ECO is a very dynamically developing international integration, the aim of which is to develop economic, technological and cultural relationships. Within the organisation, the priority issues include how to utilise and share their resources, the creation of a common market similar to the one of the European Union, and required infrastructure developments. ECO has had its own Cultural Institute since 1995, and its Trade and Development Bank has been operating since 2005. Its member

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states signed a Trade Agreement of ECO in 2003. These more and more closely cooperating ten countries are also the ones that constitute the Western and Central Asian macro-region of the Silk Road Belt.

Asian countries of the Silk Road Belt

When defining the economic geographic borders of the Silk Road Belt, we have adhered to the state borders, taking administrative-political viewpoints into account. In the case of particularly large countries (such as China or Russia), however, it occurs that the zone examined does not cover a major or minor part of the country’s territory. In the case of Russia, classification of North Asia, while in the case of China, that of Tibet is debatable. Although both historically and currently important trade routes most probably ran across the southern brink of present-day Asian Russia, the entire area of Siberia (especially if we consider the whole territory of Russia all the way to Murmansk) is less affected by the Silk Road. According to some geopolitical narratives, the Silk Road – despite the northern route, which is more logical as there are less borders and a shorter distance – partly means bypassing Russia between the European Union and East Asia. On this basis, either the whole or a part of Russia does not form a part of the Silk Road Belt. Partially, the situation is reverse in the case of Tibet. The sparsely populated, mountainous, vast area of Tibet, culturally orienting rather towards South Asia, has been mostly bypassed by the Silk Road, and therefore exerted a smaller impact on the socio-economic development of the region. Tibet, however, as part of China’s policy, is included in the geographical region of the Silk Road. Even on the level of the two major macro-regions of the Silk Road Belt, we wanted the borders of macro-regions not to cut states into two. The physical geography of the Xinjiang Uygur Autonomous Region, currently forming one political unit in China, with its population displaying similarities with the Kazakhs and the Kyrgyz people of Central Asia, is much more connected to adjoining Turkmenistan than Coastal China, dominated by the Han majority. In this analysis, however, the autonomous region, being a region of China, forms part of East Asia, and not of Western and Central Asia.

Source: edited by Ágnes Varga

On the basis of ancient and 21 st-century corridors and other routes, as well as common factors shaping the region (linguistic factors, cultural unity, political state borders and economic integrations), the Silk Road Belt encompasses the following eighteen countries: • East Asia: South Korea, North Korea, japan, China (Hong Kong, Macau), Mongolia and Taiwan; • Western and Central Asia: Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan. LONG-TERM CHANGES OF THE GLOBAL WEIGHT OF THE SILK ROAD BELT Globally, the Silk Road Belt is one of the major cultural regions (Figure 3). The region encompassing Western, Central and East Asia covers a vast area, which, with its surface of almost 20 million sq. m, accounts for fifteen per cent of the Earth’s land area.

On the basis of its expanse, it ranks number four of the nine cultural regions, after Europe and North Asia, as well as Latin and North America, which has almost the same size. In this respect, the two major macro-regions, Western and Central Asia and East Asia, are relatively balanced within the Silk Road Belt; the eastern part of the Silk Road Belt is slightly larger, covering sixty per cent of the total area of the cultural region. LONG-TERM GLOBAL LEADER IN DEMOGRAPHY In proportion to its physical dimensions, the Silk Road Belt has a greater share of global population. The demographic weight of the Belt is demonstrated by the fact that it is by far the most heavily populated of the cultural regions, as East Asia, including the world’s most heavily populated country, i.e. China, is considered as a world-leader in itself. In 2015, more than 2 billion (!) people, thirty per cent of the world’s population, were living in

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The location of the Silk Road Belt among the cultural regions of the Globe

zone. The Central Asian and the peripherally located northern ethno-regions of the Silk Road Belt (Tibet, Xinjiang-Uyghur, Inner Mongolia), however, are still hardly populated. The western macro-region of the Silk Road Belt, however, has a much smaller population; it was 460 million people in 2015. Due to the size of its land area – almost the same as Europe’s – but a relatively smaller population, the region is much less densely populated compared to East Asia, its average population density (57 people per sq. km) hardly surpasses the global mean. Its arid, semi-desert, desert climate plays an important

Source: edited by Ágnes Varga

the area of the Silk Road Belt. This was double of the proportion of its area, which means that its average population density (105 people per sq. km) is twice as high as the global mean (55 people per sq. km). On the basis of population density, it ranks “only” number three among cultural regions, lagging well behind South (413 people per sq. km) and Southeast Asia (141 people per sq. km). There are rather remarkable geographical differences between the two major macro-regions behind the average figures of the Silk Road Belt. The distribution of the population within macro-regions is much more uneven, clearly indicating the dominance of East Asia (78 per cent), two-thirds of which are represented by China alone. China, with its

“In 2015, more than 2 billion (!) people, thirty per cent of the world’s population were living in the area of the Silk Road Belt 2015.” 112

population of 1.4 billion, is (still) the most heavily populated country of the world, although its growth is slowing, and India, whose population is still dynamically growing, is expected to overtake it in the near future. The population density of East Asia (113 people per sq. km) is just slightly lower than that of Southeast Asia. Population density, however, is extremely uneven also on lower territorial levels, closely correlating with the distribution of precipitation and the duration of sunshine. Due to the scarcity of land and to overpopulation, agriculture allowed the so-called “Asian method of cultivation”. Due to the network of isolated, enclosed village communities, the centuries-long traditions of autarchic, selfsufficient, natural farming in lieu of a market economy, exchange of goods linking various districts of producers and consumers within the country, limited internal trade relations, or a prolonged rudimental state of agriculture infrastructure, the geographical distribution of the East Asian society is closely related to the carrying capacity of the land. Population is heavily concentrated in the costal zones, which enjoy the benefits of the monsoon effect and have a better agroecological potential. At the turn of the millennium, one-third of the East Asian population lived less than seventy-five kilometres away from the sea, and one of five people lived in the 20-kilometre coastal

role in population distribution. The geographical concentration of population is, just like in East Asia, significant. Since ancient times, the population has been basically concentrating along Mediterranean coasts (Turkey), and in the fertile areas along rivers (Amu Darya, Syr Darya, Indus); in other areas population density is almost insignificant. Western and Central Asia account for only a fracture of the world’s population (no more than six per cent), its geopolitical significance lies in the fact that thirty per cent of the world’s 1.5 billion Muslims live here; the same number of Muslims live in the Arab World. The country with the largest land area is Kazakhstan, and the country with the largest population is Pakistan, with 190 million people, but the role of a middle power is traditionally fulfilled by Iran and Turkey, with a population of 80 million people each. SUMMARY At the turn of the 3 rd millennium, the most widelyknown trade route of mankind, i.e. the Silk Road, connecting East, Central and Western Asia on land, is enriched with new content. The countries along the route are not connected by “One Road” only, but also the name “One Belt” has increasing relevance. In many respects, the two major macro-regions of the Silk Road Belt – East-Asia, and Western and Central Asia – have such geographical and cultural features that provide a sound basis for regionalisation processes. The establishment of the Regional Cooperation for Development several decades ago, and its recent geographical expansion and intensification is considered as a major step forward in these processes. Similar regionalisation process has been

witnessed also in the eastern microregion of the Belt, with the East Asia Summit in 2005 being its important starting point. The Silk Road Belt encompassing seventeen countries is one of the major cultural regions of our Globe. Because of China, it stands out with its huge population, but this is anticipated to moderate in this century. Within the cultural region, population density is very extreme both in East Asia and Western and Central Asia, but the imbalance between the two macro-regions is gradually fading. Its weight in world economy makes the Silk Road Belt one of the cultural regions that are catching up most dynamically. Of the two major macroregions constituting the region, the dominance of East Asia is obvious. According to the analyses of the economic concentration in the seventeen countries of the Belt, the dissolution of monopolar Japan-centredness, and the intensification of primarily China’s and South Korea’s role can be clearly detected, buts smaller economies such as Mongolia, Turkmenistan, and Uzbekistan or Azerbaijan and Kazakhstan have been growing dynamically after the turn of the millennium. Currently, a bipolar structure has evolved in the concentration of GDP. The question remains as to whether it will shift towards monopolar China-centredness if the giant country gains further strength in the future. A prognosis carried out on some of the countries in the Belt may add some interesting information. According to the prognosis, based on the data from 2000 to 2015, by 2022, per capita GDP growth expressed in US$ 100 will produce the following rank: Turkmenistan (50), Azerbaijan, and Kazakhstan (42), China (24), Mongolia and Turkey (18), Iran (8), Uzbekistan (6), Kyrgyzstan (5), Tajikistan (4). Regarding the specific values of per capita GDP, China reaches only the average of the Silk Road Belt. But the journey that it has made so far during its spectacular development is very impressive, as it was the most underdeveloped country of the Belt couple of decades ago. It is further strengthening its role of an integrator within the Silk Road Belt implied by its future development, which can render the country the most important engine of world economy.

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THE NEW SILK ROAD AS A DEVELOPMENT POLICY FACTOR Authors: János Balázs Kocsis, Dénes Komjáthy, Márton Péti, Géza Salamin

After the regime change, the main benchmark for Hungary’s development policy and spatial development was provided by the European Union. It further intensified with the appearance of pre-accession aids, and the arrival of the Cohesion Policy framework in Member States. At the same time, Hungarian state aid policy dissipated, or was combined with the efforts of the European Union. With the Chinese New Silk Road initiative, the effect of an institutionalised development scheme, launched outside Europe, has also appeared, which might bring about significant changes for our country in many fields.

How is this initiative received by today’s European and Hungarian development policy? What effects may the developments of the new Silk Road exert on Hungary’s socio-economic development? In our study, we seek to give substantial answers to these questions. It our work, it was an important aspect to provide both science and development policy with useful information. In our study, we are going to examine the content of planning documents (mainly those of the European Union) concerned directly or indirectly by the New Silk Road initiative, identify and assess their relevance to Distribution of analysed documents

the topic. This includes an analysis of the development policy and spatial development opportunities of the initiative from Central Europe’s, and in particular, Hungary’s perspective. Aside from exploring relevant literature, the research of this study mainly based on documentary analysis. The research team processed nearly a hundred applicable Hungarian and international planning and development documents. These included planning documents prepared both before and after the official announcement of the Silk Road initiative. Therefore, we were not searching for only explicit references to the Silk Road initiative, but for all content related to this topic. According to the pre-assumption of the research, we can expect the appearance of the substantial message of the Silk Road in Hungary’s public development planning. This substantial message, however, does not necessarily relate to this Chinese engagement, but it is generally about the fact that factors outside Europe and the Western civilisation should be considered more carefully in the planning activities of our development policy. Anyway, this substantial message cannot be connected to only the emergence of the New Silk Road initiative in Hungary, since the Hungarian

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government’s intention of “Eastern Opening” had become widely known in the circles of the planning profession before the announcement of the New Silk Road initiative and the preparation of every examined planning document (see later in more detail).

“Hungary, being part of Europe, could transit from being a buffer area to a Central European economic, commercial, transportation and innovation hub, significant on a global and a European scale.” Generally, we can say that topics akin to the New Silk Road can be identified in only twenty development plan documents (Figure 1). There was no document in the sample to use any of the known names of the initiative. Perhaps this is partially the reason for and partially the indicator of the fact that, for the present, rather few specific details and little information on real, tangible developments have come to the notice of the profession, despite ambitious and positively communicated Chinese ideas. THE PRESENCE OF THE SILK ROAD INITIATIVE IN HUNGARY’S CURRENT DEVELOPMENT POLICY Only ten of the forty-five analysed Hungarian national planning documents contained some content partially related to the New Silk Road, and the initiative was not named in any of them. We are going to present below the current Hungarian situation analysis and development concepts akin to the themes of the Far East initiative. The mission of the National Development and Territorial Development Concept, adopted in 2014, is to integrate Hungary’s development goals and

needs, and to define their territorial dimensions. It is an important function of the document that it constitutes the basis of the planning documents (Partnership Agreements, Operational Programmes) prepared for the 2014-2020 EU planning and budget period. From the study’s perspective, the content of the National Development and Territorial Development Concept is of particular importance because it positions Hungary’s development goals until 2020, and, with a longer-term outlook, until 2030. The sub-chapter of NDTDC entitled “Hungary’s place in the world map: from buffer area to Central European meeting place” suggests we should design our geopolitical preferences in line with the global changes experienced in the world. We should do so being aware of the fact that the global political movements of our era are shaped mainly by the economic advancement of the Asian continent led by China and India, the USA’s quest for maintaining its superpower status, and Europe in relative decline and looking for optimum ways of progress and development. In relation to the countries of the Third World, the objectives set by NDTDC is to make Hungarian foreign trade and the international financial positions of the country more proportional, to channel the expansion of the emerging countries towards the EU, and to attract investment. The geopolitical vision of the document is strengthening the meeting-point function of Hungary, exploiting our geographical potentials. The planning document perceives that Hungary, being part of Europe, could transit from being a buffer area to a Central European economic, commercial, transportation and innovation hub, significant on a global and a European scale. Furthermore, it could function as the Eastern gate of the innovation zone of Western Europe, opening towards the Asian economic force field. Accordingly, the document claims, it is unavoidable to create a Central European business gate area, especially in the fields of services, logistics and innovation. NDTDC considers the geographical diversification of Hungary’s foreign economy through the expansion of economic relationships with nonEU countries a strategic objective. The planning document regards the increase of exports to China and the stagnation of Chinese imports, i.e.

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the improvement in the foreign trade balance with China as a favourable trend. (At this point we can mention that the effects of the planned Budapest-Belgrade railway line on foreign trade are worth examining.) The Wekerle Plan, aiming at a more profound economic integration of the countries in the Carpathian Basin, had preceded One of the known, specific projects planned within the framework of the New Silk Road is the construction of a high-speed railway line between Budapest and Belgrade. The Hungarian section of the Budapest-Belgrade high-speed railway line is estimated to cost Hungary some HUF 500 to 700 billion, and eighty per cent of the investment would be financed from Chinese foreign currency loans. The development is also in line with the Southeast-European transport development attempts of the European Union, also featuring in the trans-national programmes of the EU; still, the EU raised several concerns about the project, resulting in infringement proceedings launched by the European Commission in May, 2016. The intergovernmental agreement between Hungary and China is being inspected, in which the main contractor was awarded the work without a tender process. The Commission launched another investigation in May, 2017, and will look into the financial feasibility of the project. The project is often criticised in economic journalism as well. One of the major element of the criticisms is that despite China’s efforts, the link between Belgrade and the Greek ports has not been created yet. Second, some

the National Development and Territorial Development Concept in time, but the mentality of the two documents shares many similarities. The Wekerle Plan highlights that after the global economic crisis, the centre of gravity of growth in Europe shifts from the West to Central Europe, thereby it becomes possible for our region to calculations suggest that return on investment is not ensured by expected passenger and freight traffic of the section even in a longer term. Third, the counterarguments are centred around the dilemma whether facilitating the inflow of Chinese goods serves Hungarian or European economic interests. The latter one is obviously a criticism against the project as well as the entire Silk Road initiative and the attitude towards it. Examining the budget of the project in the context of Hungary’s development policy, this single project alone renders the New Silk Road initiative a significant factor (however, no other elements expressed in specified amounts related to the initiative are known). Its budget may exceed half of the entire seven-year budget of the Transport Development Operational Programme 2014-2020 (over HUF120 billion), co-funded by the EU. Although the total cost is significantly lower, but the scale is the same as that of the other giant investment of Hungary, Paks 2. The comparisons above illustrate that it might be one of the greatest state investments in the coming years.

The estimated investment cost of the Budapest-Belgrade high-speed railway in comparison with some important economic data (HUF billion)

Source: based on data from Dányi 2016, HVG 2016, Michigan State University 2016, MIT 2016, Perger 2017

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become the meeting point of innovation-driven Northwest Europe and the dynamically developing, labour-based Asian region. According to the document, this is an opportunity for Central-Eastern Europe to narrow their historical development gaps as soon as possible and thereby catch up with Western Europe. The Wekerle Plan dwells on the coordination and a joint, cooperative development of tourism in the Carpathian Basin, which can be connected to China’s efforts of marketing tourism, driven by Hungary, through cross-border tourist destinations, which aims at promoting the touristic values of the 16+1 countries among Chinese tourists in one collective effort. In relation to the transport system of our region, the National Transport Infrastructure Development Strategy (Ministry of National Development, 2014) sets out that in our country the lack of upgrading of railway tracks often leave room for less environmentally friendly ways of transport, such as road transport, even on highly frequented passenger lines (Budapest–Hegyeshalom, Budapest–Kelebia, Budapest–Lökösháza, Budapest– Debrecen, Budapest–Miskolc, Budapest–Záhony). Most in- and outbound transit is generated at the boundary points of these routes, thus the modernisation of our railway tracks is of particular importance. The planning document notes that the development of European and more distant economic regions reached through ports predicts a considerable development of Hungarian freight services. In its SWOT analysis, however, it points out that the failure of creating cross-border, integrated industrial-logistics zones is likely to result in experiencing nothing but harmful effects of transit traffic on the road network and the environment in Hungary. The situation analysis of the National Transport Infrastructure Development Strategy highlights the fact that the implementation of the railway modernisation under the New Silk Road projects is insufficient for the development of the country, and without logistics developments implemented within the framework of related, carefully considered international partnerships it entails several disadvantages and potential risks. The situation analysis of the document also mentions the advantageous geographical location of the country, and the inherent potential “connecting link” role,

pointing out that our country means an unavoidable gateway of intermediary regions in the trade of Asian goods.

“... the failure of creating cross-border, integrated industrial-logistics zones is likely to result in nothing but experiencing harmful effects of transit traffic on the road network and the environment in Hungary.” Increasing the share of railway in transport, improving the standards, punctuality and reliability of the service, modernising the fleet, and setting attractive tariffs are also included in the Second National Climate Change Strategy. The mediumterm action lines of the document also include the preference of railway in freight transport. In relation to transport, the second largest emitter of greenhouse gases in Hungary, it also describes the importance of the advancement of more effective vehicles with innovative technologies and alternative fuel vehicles. This will rather concern land transport to an appreciable extent. In the chapter on the energy-dependency of the developed world in The National Energy Strategy 2030, a sub-chapter is dedicated to China’s and India’s emergence on the global energy market. The strategy, addressing a range of geopolitical issues as well, sets out that its export-oriented economy and increasing energy import forces China to diversify its resources, secure its marine transport routes, and transact its energy import from Central Asian countries through oil and gas pipelines along terrestrial routes. The document notes that Beijing has also launched targeted renewable energy programmes, primarily in order to reduce its dependence on external energy import rather than out of climate protection

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One of the specific projects related to the New Silk Road is tourism-related, and has already been implemented. Therefore, tourism is at the vanguard of implementing concepts related to the New Silk road initiative in our country. Hungary, as one of the 16 + 1 countries, has been hosting the Tourism Coordination Centre (TCC) of Central Eastern Europe since May, 2014, the aim of which is to promote the 17 countries of the cooperation as one touristic target region on the Chinese touristic market. The cooperation is realised on the level of public administration, national tourism organisations, and Chinese enterprises engaged in travel arrangements, and its main scope includes the simplification of visa issues, the development of air transport, the touristic development of the Silk Road and the improvement of regional educational relationships. In March, 2016, the China National Tourism Administration opened its first agency in the region in Budapest, which almost immediately launched an advertising campaign entitled Beautiful China, Silk Road.

considerations. China is opening towards Central Asian countries (Kazakhstan, Kirgizstan, Tajikistan, Turkmenistan and Uzbekistan), justified by the strategic geographical position of and the wealth of natural resources (petroleum, natural gas, hydro energy resources, ferrous and non-ferrous metals, including uranium) in these countries, the Strategy claims. According to the National Energy Strategy, China’s growing dominance in the region raises a number of geopolitical questions. Central Asian countries, which have been drifting with the current of the world economy for long decades, may now play a key role in the near future in deciding energy policy issues of global significance, with China becoming the main regional partner, able to assert its influence. The document indicates the necessity of accommodating to unfavourable processes generated by China’s energy production and energy structure. The scenarios suggest that China will use twice as much coal for electricity generation by 2035 as OECD, consisting of the countries with the most advanced economies of the world, will. According to the Strategy, Hungary will have two options, taking the amount of energy carriers and

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the growing consumption demand into consideration. One of them forecasts a future afflicted by rising international conflicts, and the other predicts Hungary’s growing independency from global trends. To achieve this, the document names five instruments: energy savings, using the greatest possible share of renewable energy, use of safe nuclear energy, integration into European energy markets, and establishing a bipolar agriculture. The conclusion of the National Water Strategy, developed in 2013 (Ministry of Rural Development, 2013) calls attention to an interesting opportunity. Hungary’s economic policy is open towards Asia, including China and the Arab World. One of the common features of these countries is their huge demand for infrastructure development and significant capital, but they are able to achieve considerable growth and meet their own demand only through heavy investments, due to the scarcity of their water supplies. These countries, due to the horribly high costs of expanding their local water supplies, locate a share of their production into countries with more easily available water supplies. According to the National Water Strategy, it is an opportunity for our country, too, to implement a developed irrigation crop production system funded from foreign sources, and then animal husbandry and an entire production chain of food industry building upon it would allow us to repay with made-up articles, and, in addition, to significantly increase employment in the country and contribute to the development of the economy.

Strategy to prevent and reverse the European countries’ loss of advantage against the United States, China or the BRIC countries in the fields of R&D, innovation and higher education services. This is especially an imperative in Hungary, where the competitive disadvantage has increased more significantly than the EU average in the fields of R&D and innovation.

“Central Asian countries, which have been drifting with the current of the world economy for long decades, may now play a key role in the near future in deciding energy policy issues of global significance, with China becoming the main regional partner, able to assert its influence.”

Compared to national and industry-level planning documents, less situation analysis or development concepts can be found in Hungary’s territorial planning documents. During the analysis of twenty-two planning documents, only the development documents of the two frontier counties most concerned by the Budapest-Belgrade railway investment contained reference to the New Silk Road project, without mentioning its name.

The Territorial Development Concept of Csongrád County (Territorial Development Council of Csongrád County, 2007) considered the reconstruction of the Budapest-Belgrade high-speed railway as early as 2007. The document establishes that the Hungarian section of the Budapest-Belgrade high-speed railway running on the Budapest-Kelebia route without any regional connectivity options is unacceptable for the county. The concept

in Far Eastern countries (China, South Korea, India, Japan, etc.), Russia, the CIS countries, Brazil and the Gulf countries. The above-mentioned Eastern Opening should be demonstrated by, in addition to intensifying marketing activities, encouraging investments and launching direct flights. With regard to the fact that our country is unable to carry out effective marketing activities on vast Asian markets by itself, it is important to strengthen regional cooperations (e.g. with neighbouring V4 countries) also in the field of tourism. Hungary’s Science Policy Strategy (2014-2020) highlights the objective of the Europe 2020

In addition to being an indisputable opportunity to break out, however, this concept, as well as the specific plans of infrastructure development related to the New Silk Road project, also entails risk. If the above-mentioned entire production chain of the food industry is not, or not to an appropriate extent, developed, it might jeopardise the efficient and cost-effective operation of the entire system. The National Tourism Development Concept 2014-2024 urges Hungary to place a greater emphasis on Eastern relations. This, the document suggests, should prevail in tourism, increasing Hungary’s presence on more distant, outbound Eastern markets. In this framework, a greater emphasis should be placed on the increase of demand

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Countries of the 16 + 1 format in Central-Eastern Europe

It is worth, however, allowing insight into cooperation initiatives having the most direct economic developmental impact and the challenges of cooperation, primarily concerning the topic of commerce and investments. On recent years, a more active dialogue between the EU and China can be witnessed on these topics, either in relation to the Silk Road initiative, or independently from it. Based on the Joint communication on Elements for a New EU Strategy on China, issued in June, 2016, connecting the Eurasian continent via a physical and digital network would be beneficial for both the Union and China. A political forum,

Source: edited based on Stanzel 2016

sets out the joint objective of the Southern Great Plain to reach the Budapest-Kecskemét-Szeged track with a stop in Szeged or alternating stops in Szeged and Kecskemét. For this, they conclude, concerted lobbying is required. The county-level planning document, effective from 2014, (Local Government Office of Csongrád County, 2012), treats it as a fact that the high-speed railway constructed as part of the Hungarian section of transport corridor No.4 will be built via Szeged, and not Kelebia, in the zone of Csongrád County’s main transport route. By contrast, the Territorial Development Concept of Bács-Kiskun County (Local Government Office of Bács-Kiskun County, 2013) mentions the modernisation of the Budapest–Kiskunhalas–Kelebia

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railway line among missing infrastructure developments hindering integration, in the category of project preparation. Apparently, often contradictory pieces of information were published about the details of the railway investment. The Hungarian Telegram Office (2016) claims that the project will be implemented according to original plans, on line No. 150 between Budapest and Kelebia. COMMERCIAL AND INVESTMENT IMPLICATIONS WITH DEVELOPMENTAL IMPACT BETWEEN THE EU AND CHINA China and the EU have longstanding, complex relations with each other, and this study cannot aim at giving a comprehensive overview of these.

the so-called Connectivity Platform, has been set up for this purpose. Its most important mission is to create synergies between EU policies and projects and China's "One Belt One Road" initiative (European Commission 2016). The document argues that Europe is the most important target of direct foreign investments of Chinese companies seeking a stable and fair environment. The Union, with its expertise, can facilitate the Chinese economic reform, and the comprehensive dialogue with Beijing can ensure a continuous exchange of ideas and experiences. The EU is seriously concerned about industrial over-capacity in a number of industrial sectors in China, notably steel production, which creates unfair conditions of competition for European companies, if the EU market is flooded by dumped Chinese products. The communication mentions the conclusion of a deep and comprehensive free trade agreement among longer-term opportunities. However, it can be envisaged only in the case of concluding an ambitious investment agreement and creating a level-playing field for business. The EU expects China to make significant and verifiable cuts in industrial over-capacity based on a clear timeline of commitments and an independent monitoring mechanism. In many aspects, Central-Eastern Europe is a kind of “back door” or, from a different point of view, an experimental area for China’s investments in the EU. The primary aim of the “16 + 1 Cooperation”, named after the number of countries concerned in the region, is to create favourable investment conditions in the region (Tianping 2015), while others claim it is to evade the Union’s regulation. It is a fact that major Chinese investments in the

region often run counter to EU regulations. In any case, effective cooperation is currently hindered by many factors. For the present, Chinese companies seem to lack information and experiences about the CentralEuropean region. Analyses often refer to the insufficient knowledge and understanding of legal regulations and the socio-economic background. At the same time, Chinese experts are mostly concerned about the reactions of the EU’s leadership. The institutions of the EU and some of the “large contributors”, including primarily Germany, have criticised the creation of the 16 + 1 Cooperation, claiming it is merely an attempt to divide the EU. In order to transfer the required background knowledge and partly to subside the fears mentioned above, China suggested setting up consultation companies in cooperation with China’ s government, the task of which is to eliminate investment risk, prepare feasibility studies, and explore and analyse local regulations. It is important to mention that Beijing does not have problems exclusively with the regulations of the European Union; some Chinese experts, for example, indicate that it is a problem about the cooperation with Serbia that laws and regulations there are not as strict and clear as they are in the case of EU countries (Pavlicsevics 2016). As inbound foreign direct investments are not regulated on EU-level, each Member State had to design their own regulations. Accordingly, some countries (e.g. Germany, France) introduced strict controls in some “sensitive” sectors, such as defence or security, while others, such as Hungary or Bulgaria, made themselves completely open to foreign investments, without any restrictions. The conflict of views and interests between the EU Member States in relation to the New Silk Road initiative is illustrated well by the joint request of the German, the French and the Italian government at the beginning of 2017, calling on Brussels to grant national governments a right to be able to scrutinize and, if necessary, veto undesirable Chinese acquisitions in the high-tech industry. The countries concerned also expressed their concerns about the considerable competitive advantage that Chinese investors could gain under unfair circumstances, as they could acquire also

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strategically important companies relying on state fund. As the Chinese do not primarily need companies but rather their knowledge and technology, selling them would place the European market at considerable competitive disadvantage. The two parties represent very different views, with regard to the fact that German investors cannot acquire Chinese companies at similar ease, since the Chinese state would block that with its effective instruments, the German government claims. Brussel is under considerable pressure now, as France and Italy – the second and third largest economies in the Eurozone – have also signed up the proposal submitted by Germany in 2016.

selling their products at less than cost, which is deplored by manufacturers both in Europe and the USA, as they are put at a competitive disadvantage. As a response, import duties and minimum prices have been introduced, generating debates lasting for years. However, not all the EU countries have agreed with the strict restrictions imposed upon the import of Chinese solar panels. In February, 2017, the European Commission was forced to soften a proposal to extend anti-dumping duties on Chinese solar panels and limit the extension of measures, after opposition from a majority of EU countries that wanted lower import prices. While the majority of countries laud the fall in prices caused by cheap import products, solar panel

Another good example of unequal conditions of competition on the global market is the case of solar panel manufacturers. In recent years, the solar energy market has demonstrated enormous growth, owing to the rapidly improving competitiveness of the technology. Various companies try to remain in the extremely fierce global competition by lowering their prices. The problem is caused by Chinese manufacturers, who, completely relying on state subsidies, have been

manufacturers are concerned about the future of the industry and European workplaces. In September, 2013, when the official launch of the New Silk Road is dated, negotiations on the EU-China 2020 Strategic Agenda for Cooperation (EU 2013) had already been ongoing. The Chinese party, however, was seriously hesitating about including the New Silk Road initiative in any form in the document. Eventually, that did not

Chinese FDI in Central-Eastern Europe (US$ 10,000) (2003-2013) (a)

happen, even despite the EU’s clear indication of its intention to set up an infrastructure Connectivity Platform. During further transport development negotiations, the Chinese were unable to produce sufficient criteria about their European plans and the role of Europe within the initiative. Therefore, on Community-level, the New Silk Road seems to Europe to be merely the repackaging of initiatives and projects that had been planned or even launched in Europe before Xi Jinping’s speech in Astana, such as the Green Lane project serving the simplification of customs procedures. From the initiative’s perspective, novel ideas promising tangible results have been formulated on the level of its member states or, at best, the “16 + 1 Cooperation, which, again, well demonstrates that China regards the system of the EU “overregulated” and problematic. Today, however, China seems to have realised that the institutions of the European Union are unavoidable partners in the implementation of infrastructure investments planned on the continent, and the dialogue with them is indispensable during the “separate” negotiations with Member States. In line with that, the parties officially agreed in Milan in October

2014 that the routes to be constructed within the framework of the initiative would end in China in one direction and in Europe in the other direction. Perhaps the first tangible sign of the cooperation is China’s significant contribution to the Juncker Plan. Nonetheless, Brussel’s perception that Beijing is seeking to evade EU institutions and negotiate separately with Member States is obviously right. There have been a lot of things pointing to that, such as the uncoordinated accession of EU Member States to the Asia Infrastructure Investment Bank. For the EU, joining the New Silk Road, in addition to insights into international processes and an opportunity for cooperation, also means competition. The Connectivity Platform is supposed to, among others, channel Chinese infrastructure investments into pipelines also acceptable for Brussels, helping China understand and apply EU regulations. In the EU-China 2020 Strategic Agenda for Cooperation, the parties have set the common objective of concluding a comprehensive EU-China Investment Agreement, which covers investment protection and free market access. This future Agreement would provide for progressive liberalisation of investment and the elimination of restrictions for investors to each other's market. In addition, the Agreement promises a simpler and more secure

Chinese FDI in Central-Eastern Europe (US$10,000) (2003-2013) (b)

Source: based on data by Tianping 2015 Source: based on data by Tianping

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legal framework to investors, and, once concluded, would replace the existing bilateral investment treaties between China and EU Member States with one single comprehensive agreement covering all EU Member States. Development in the field of various regulations and the introduction of reasonable restrictions are increasingly important for China as well, as serious deficiencies in the protection of intellectual property rights have been undermining the efficiency and profitability of technological novelties and innovation within the country.

“A new consulate was opened in Chongqing by Hungary’s Foreign Service Network in 2010, which can be regarded as a forerunner of the »Eastern Opening«, illustrating well how China’s global and bilateral role had increased.” The EU-China Food, Agriculture and Biotechnology (FAB) Flagship Initiative was published in 2014, with the aim of ensuring sustainable agriculture and food security and safety in the EU and China. The initiative is engaged in, among others, controlling and monitoring processed agri-food products, sustainable consumption, organic farming, water and soil management, animal health and welfare, as well as promoting biomass sources and standards, the elements of which have been integrated also into the HORIZON 2020 Programme. (EU-China FAB 2016). THE SILK ROAD AND OTHER CHINESE DEVELOPMENTS AND INVESTMENTS IN HUNGARY After the global economic crisis, a new, ever more intensive chapter has opened in the Sino–Hungarian relations, an important sign of which was the policy of “Eastern Opening”, announced in 2011.

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Trade between China and Hungary, 2005-2014

The initiative was motivated by several factors simultaneously, including the concentration of the exports of the country, both in terms of geography and product structure. The “Eastern Opening” was given an extremely important role in the territorial diversification of exports, and the concept is still strongly present in Hungary’s foreign policy. Although the Hungarian government emphasises that maintaining good trade relations with traditional Western partners is important, the main objective of the policy of “Eastern Opening” is, beyond doubt, to reduce Hungary’s economic dependency from the West. China is given a prominent role in the policy of “Eastern Opening”, but the two countries started to foster more intense economic relationships in 2003. Since then, high-level meetings between Beijing and Budapest have been held on an annual basis. A new consulate was opened in Chongqing by Hungary’s Foreign Service Network in 2010, which can be regarded as a forerunner of “Eastern Opening”, illustrating well how China’s global and bilateral role had increased. According to Hungary’s Foreign Trade Strategy in 2011, increasing exports towards the East is important to enable Hungarian enterprises to make more profit through their exports from the growing imports of dynamically developing economies (China, India and Russia). For this purpose, the strategy regards the manufacture of medical instruments, agriculture, food industry, environment and water industry, alternative energy and high-tech manufacturing processes of any field as the most promising. In addition, it considers the export of services to China (e.g., cartoons, design, fashion industry, tourism) and the allocation of capital also appropriate. In the field of economic diplomacy, it hopes that Hungary’s economic relations will further develop through the expansion of regional/provincial cooperations, which is expected to bring substantial results in the increase of exports to Russia, China, India and Turkey. The initiation of setting up state-owned trading houses facilitates Hungarian small and mediumsized enterprises to reach also Asian markets. The Hungarian National Trading House Cls. (Nemzeti Kereskedőház Zrt.) was established in 2013, and

Source: Edited by Ágnes Varga

new departments, e.g. Turkish, Kazakh and Chinese, were set up within the Hungarian Chamber of Commerce and Industry. Hungary’s room for manoeuvre, however, is globally limited, as it is regulated by the common trade policy of the European Union. In the short term, the strategy can affect Asian exports only to a small extent, given the fact that Hungarian trade is mostly integrated in the international system of multinational companies. In terms of imports, China has been one of the most important trade partners of Hungary since 2005. By 2012, the Chinese share of Hungary’s total imports increased by more than two and a half times on 2003. Today, the Asian giant is Hungary’s third most important import partner after Germany and Austria. The policy of the “Eastern Opening”, however, does not focus only on the development of trade, but its objectives also include attracting Asian direct investments. Before announcing the policy, there had been signs that Hungary is an important location for Asian, and in particular, Chinese investments. In 2010, Hungary took eighty-nine per cent of the total Chinese capital flow to the CEE region. By 2014, the amount of Chinese investment had reached US$556 million, which is by far the highest figure in the region (Figure 5) (Szunomár 2015). However, it is interesting that, despite the deliberate steps taken by the Hungarian government in relation to its policy of “Eastern Opening” and

favourable for China, trade volume between Hungary and China, as well as indices of Chinese investments in Hungary, has increased only moderately. The underlying reason is that the bulk of foreign trade between the two countries is based on business performed by multinational companies, which are less affected by the measures, and their particular product types (automotive, electronics and telecommunications), while the performance of Hungarian small and mediumsized enterprises, more affected by government initiatives, have little impact on country-level indices. At the same time, we can conclude that the volume of Hungarian export to China has been growing, although not very sharply, each year, while most Chinese capital investment has been targeted to our country in the Central-Eastern European region. Neighbouring countries, however, have been also actively developing their Chinese relations, suffice to think of the strategic partnership between Poland and China. All this might raise doubts about the “distinguished” title of Hungary’s relations with China. Polish analysts argue that stronger Sino-Hungarian relations might be beneficial for the entire microregion, because China is expected to commit itself also to other countries in the Central-Eastern European region. Furthermore, it might be Beijing’s interest to build relationships with stable countries deeply integrated in the system of the European Union, thus

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there might be a valid Chinese intention to offer alternatives for EU sceptics. We need to see, however, that every external partner has difficulties with orienting themselves in the intricate context made up by the EU and its Member States. Obviously, it is not easy for China, either, to identify its own clear interests in the Union-centred or nation state-centred debates of the Union. SUMMARY The New Silk road initiative was a turning point in European and Hungarian development policies. It can be stated despite the fact that, for the present, we cannot talk about its considerable effects, and only a few of its specific development concepts are known, and even less projects have been launched. Still, it can be regarded as a turning point because the emergence of the initiative directed attention towards the role of development factors outside Europe, the region of the Atlantic or Western civilisations. Naturally, an outlook beyond Europe has always been present in the international development programmes and neighbourhood policies of the EU and its Member States. However, it has not appeared as an important development aspect affecting Europe. These regions have never been considered for roles from where ambitious concepts or even development funds can arrive. With the New Silk Road initiative, this era is over, even if this specific Chinese intention eventually does not bring much result. It must be seen that China is not just an increasingly important trading partner, but also an actor approaching along conscious development and investment policies. It conducts its activities of this kind in the vulnerable developing world (see Africa) as well as in the countries of the developed world, in Europe. China’s dedicated economic resources are slowly approximating the scale of the public development funds redistributed within Europe.

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The analyses of this study have highlight that the New Silk Road initiative is on the agenda of European and Hungarian public development policymaking. The eastern cooperation opportunities of public development were practically identifiable in the development planning of the European Union before the official declaration of the New Silk Road initiative. At the same time, we can say that the plans contain only few specific and deliberate intentions in relation to this development trend. We cannot by any means talk about it constituting a common position, a single development system;

The Silk Road initiative – irrespectively of China’s careful political communication – is clearly an initiative of China as a major power serving its interests. Accordingly, there are short- or longer-term Chinese economic interests behind its development policy aspects. It is a complex question as to what interest China has in European development. China can reach the EU through several trade corridors, and the EU Member States are its trading partners of different importance. Presumably and observably, China cannot clearly see what are the strategies along which it should approach the EU

it is embodied only in the form of individual projects, or trade and other related (e.g. cultural) cooperation initiatives. In terms of development policies, the dimensions of the initiative, however, are huge and of historic proportions: they have the potential to further converge the economic systems of Europe and China. Nonetheless, for the present, substantial discourse and planning is lacking; for example, no projects have been set up to construct specific transcontinental corridors, the role of Europe in them or their schedule have not been defined, etc. Naturally, it is quite possible that these huge dimensions are the very reasons why it is not easy to formulate development intentions more systematically (as it is not always clear what the European interest exactly is).

and individual Member States.

Hungary, with its policy of “Eastern Opening”, has turned towards this region very early, at least in terms of foreign trade. These early intentions can be detected in high-level planning documents of the development policy (e.g. NDTDC). However, the Silk Road as an opportunity for development policy has not been disseminated widely in the planning activities of territorial and industrial developments. In the future, this concept deserves more attention in strategy-making. All this is not necessarily to be assessed as only a development opportunity, but risk should also be considered in the case of certain big project initiations.

It is not obvious for the EU, either, what the European interest in the Chinese cooperation is. Amid current processes in the European Union, the Far East and the Pacific, having multiple possible outcomes, it is difficult to clearly identify the interests of the European Union or of individual Member States. In the case of any increasing trade or political conflict between the USA and China, and with growing political dividedness within the EU, and as the Brexit process advances, it is even more difficult to outline these. Thus, the question remains as to how the internal cohesion of the EU, the Europe-USA relations, and the China-USA relations evolve, irrespectively of China’s intentions. Will there be any implications requiring the rapprochement of the EU and China? Presumably, China, for the present, has no interest in dividing the European Union and offering development alternatives within the framework of the New Silk Road to the community development policies of Brussels. For the present, the EU, hard to understand, can be interesting in its unity when China’s investment intentions are realised. It is also obvious that the Visegrad countries of the EU, due to their geopolitical location, are given an important role in the development partnership related to the Silk Road. But within this group of countries, the question remains as to whether

“Thus, the question remains as to how the internal cohesion of the EU, the EuropeUSA relations, and the China-USA relations evolve, irrespectively of China’s intentions. Will there be any implications requiring the rapprochement of the EU and China?” competition or coordination will be more powerful when specific Chinese developments are received. Hungary’s development interests are equally difficult to predict. Probably each project should be considered individually. It is worth being appropriately prepared for the projects to profit as much as possible from them (e.g. transport development should not increase Hungary’s transit traffic, as many Hungarian entrepreneurs as possible should be deployed by projects even outside the territory of Hungary, strategic industries should remain domestically owned). Hungary is located in a region which suffered a lot from initiatives of major powers and their legacies; it can be a valid suggestion for the country to deliberately opt out of certain developments. Whatever position Hungary will take – either participation or deliberate opt-out – , it will be in line with the development policy interests of the Visegrad region, expressed in an ever more pronounced and consistent way, either within Europe or towards Chinese initiatives.

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NEW SILK ROAD – TRANSPORT CONNECTIONS Author: Balázs Forman

When looking for the motives of building the New Silk Road, it is worth reviewing the economic development theories and – if the comparison is feasible – choose similar historical and geographical examples.

There are several such examples. Since the size of the country is similar, the United States of America offers itself as an obvious one. The era of the US economic convergence with the European powers was a century earlier than in the case of China. The symbol of that period’s infrastructure development is the Golden Gate Bridge near San Francisco. But the rapid economic growth did not result in a sharp increase in infrastructure developments. Although the base of 1900 was very high concerning the length of completed roads. In case of Japan and South Korea the choice of the periods selected by authors Garnaut-Song-Woo might seem surprising from a Hungarian point of view. Considering Japan, classifying the period between 1894 and 1926 as convergence period seems to be too early contrary to the Hungarian view. We would put this period half a century later in Hungary, in the era following the Second World War. In case of South Korea, to perceive the times after the Seoul Olympic Games as convergence period seems to be too late. The analysis, however, appears to be correct if we consider the fact that the fast development of the road network started 24-25 years after the beginning of the convergence period. The reason is quite simple; the fast-paced economic development in these Asian countries resulted in growing company incomes and thus in the growth of wages in 20 years’ time. We have to add that for a long time it was a purposeful economic policy in the Asian

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countries that they tried to maintain international competitiveness by keeping wages at a low level. This amount of time was enough for workers to accumulate a wealth from their increasing wages that enabled them to afford their first car after buying a flat. This phenomenon was true in South Korea and China but it was surely not true in Japan a hundred years ago. But it is of crucial importance in China now. The growth of the Chinese car-fleet is dramatic. There were only 5.5 million cars in China in 1990, 30 per cent of which was passenger cars. In 2000, there were 16 million cars with 8.5 million passenger cars among them. By 2015 the total number of cars increased tenfold since the turn of the century and grew to 162 million. The number of passenger cars grew 16 times, to 141 million. What concerns private owned passenger cars, their number grows exponentially. In 2010 it grew by 11 million, in 2011 by 12 million, in 2012 by 14 million, in 2013 by 15 million, in 2014 by 18 million and in 2015 again by 18 million. Thus, the number of privately owned cars has reached 127 million. Actually, China – densely populated and with large crowded cities – has no other choice than to develop its infrastructure and road network in a way that could accommodate not only current needs but also the needs of the future. This is an opportunity and, at the same time, a must. The orientation towards external markets has partly been replaced by growth relying on the internal market. The low internal demand for

consumer goods is one of the typical reasons for investment and construction companies receiving huge orders. Infrastructure developments and especially motorway constructions are delivered at record speed. Between 2005 and 2015, the total length of the motorway network tripled: it grew from 40 thousand kilometres to 125 thousand kilometres. On the annual average, 8,000 kilometres were built. Let us cite here a few data to illustrate the volume. The interstate motorway network of the United States, built for 120 years, is altogether 77 thousand kilometres. China has built more than that in the past 10 years. Germany has built 12 thousand kilometres of motorways over 90 years; this volume has been completed in one and a half years by China. The 16 thousand kilometres of motorways that Spain built during 30 years is equal to the amount constructed in one and a half years in China. Motorway construction belongs to provinces, but a lot is built by big cities as well. In Germany, during the period of the Third Reich (1935-1938) 1,000 kilometres of motorways were built. In the 1970s, the golden era of motorway construction in the Federal Republic of Germany, 300 kilometres of Autobahn was averagely built per year during 10 years. Taking the population or territory size into consideration, the total current length of the Chinese motorway network can be compared to the American, Japanese, German and Spanish examples. But if we consider the length that has been built since 2005, we can say that it is simply unprecedented. We cannot come up with any other example, neither from population, territory, GDP, nor per capita GDP aspects. Only the scale of motorway constructions in Germany of the 1930s was similar on the basis of population size.

“China actually has no other choice than to develop its infrastructure and road network in a way that could accommodate not only current needs but also the needs of the future. This is an opportunity and, at the same time, a must.” In February 2017, the Chinese government decided that it would launch a large-scale expansion of the transport infrastructure until the end of the 13th Five-year Plan, lasting until 2020. The target is to have 150 thousand kilometres of railway network and 5 million kilometres of road network by 2020. Furthermore, the country should have 260 civil airports, and 2527 ports with the capacity of handling vessels over 10 thousand tons. The high-speed railway network is planned to expand to 30 thousand kilometres by 2020. Each city with over 1 million inhabitants is aimed to have its own airport, motorway connections and high-speed railway line. During the five years, altogether 15 trillion yuans, i.e. about 634 trillion forints, will be poured into these investments.

The 8,000 kilometres of motorway built every year is longer than the straight line distance between Beijing and Budapest, which is 7,340 km. 8,000 km are the straight line distance between Beijing and Brussels.

Developments of such scale bear world economic significance not only because of their funding but also because of their demand of building materials. “It is an often cited figure that China used more cement between 2011 and 2013 than the United States in the entire 20th century.”

China develops not only its road network intensely, but also its railroad network, high-speed railway, airport and port capacities. The question is not only how much traffic these infrastructures can handle, but also who finances their construction and from what resources.

Looking at the composition of investments in Chinese national economy between 2003 and 2015, we find that the total value of all investments grew tenfold in nominal value. The three sectors that had the largest share in the investments in 2003 included the processing industry

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China’s transport infrastructure

provincial and local governments, mainly to provincial governments. In the case of expenditure, however, the ratios are quite different. Only 14.5 per cent of the expenditures outside the public finance sector is spent by the central budget, while 85.5 per cent of it by the provinces. In 2015, the central budget transferred 63 per cent of its revenues to the provinces, while the general government deficit is equal to the expenditures of the central budget. It is of major significance to the Chinese public finances that although the central government’s budget is balanced, the provinces implementing public interest investment projects are indebted. The central government directly finances railway investments, but all other transport investments are funded through the provinces. Proposals for road building are put forward by provinces competing with each other. The problem with the system lies exactly here. Corruption in the provincial governments, their intertwinements with the local construction companies and the plasticity of their budget limits lead to building plans without setting any limits.

Source: China Statistical Yearbook, 2016

(26 per cent), housing constructions (24 per cent) and transport (11 per cent). By 2015 the share of processing industry grew to 32 per cent. Housing construction remained at the same level but the share of transport decreased to 9 per cent. At the same time, the share of environmental and water

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management investments increased from 8 per cent to 10 per cent. The peculiar structure of the Chinese public finances brings additional perspective. 45 per cent of the national revenue is paid into the central budget and 55 per cent into the budgets of

We can see here the planning problems of centrally-planned economies described by János Kornai as well. The size of the country and its population are too large for making all decisions in Beijing. Provincial governments take advantage of their familiarity with local circumstances and lobby intensively at the central government for investment resources and projects. The excess demand for transport projects results mainly from this. Each provincial government measures its success by the number of kilometres and flats built. This is further reinforced by state and private companies lobbying at provincial level for more and bigger orders. Constructions are explained by the demand created by growing car traffic and economic development. But the result is that all cities with a population over 500 thousand are already connected to the national motorway network. All provincial seats, prefecture centres, sub-provincial cities and municipalities have all been connected to the national motorway network. The 10 largest cities have 4-5 motorway ring-roads around them. As a result, by 2000 the total length of China’s motorway network surpassed that of the US interstate motorway network.

The comparison of the American and Chinese infrastructure developments and total lengths of networks in the first 30 years of their convergence periods shows that while in the US it was the railway constructions that fuelled growth, boosted steel and vehicle production generating significant multiplier effects, in China this role is played by road network development as far as infrastructure is concerned. In China, this boosts cement, asphalt and steel production and their suppliers, including coal mining.

“As a result, by 2000 the total length of China’s motorway network surpassed that of the US interstate motorway network.” From another aspect, in the convergence period of the US, car industry and road building – being still at their early stage – played a subordinate role. In China, railway is in a similar situation. Among the countries examined by Ross Garnaut, Ligang Song and Wing Thye Woo, it was only in Japan where the development of roads and railways ran parallelly. As Daren Acemoglu (2009) pointed out in his studies, in the US railway developments, while in China road developments correlated with the economic growth. The model of the Chinese infrastructure development is the following. The substantial part, around 70 per cent of cement and steel production is bought by the state and the provinces. This has brought about and nurtures several fastgrowing industries. This is the demand stimulating effect of developments. At the same time, roads and railways built stimulate production and the supply side through making transport available and/or making transport costs and expenses decrease. The high rate of return on social costs was justifiable so far, but in the Eastern part of China – in the 500-km zone along the coast – the densest motorway network in the world has been

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built by now. The social return of new motorway constructions will quickly decrease, because long new sections could hardly be built in sparsely populated areas. New constructions would take place necessarily in densely populated regions, which means that unit costs would increase due to higher property prices and expropriation costs in the required territories. Road infrastructure development, which has so far been the engine of Chinese economy, now seems to be wearing out. The current rate of building cannot be maintained any longer, but several millions of jobs among suppliers and thus livelihood of millions of people depend on it. The new constructions

by the shortest possible route. In a region with two radial transport networks there is one major route. It is the one that connects the two centres. Among the six-six settlements those stand out that are situated on this route. 3-3 settlements can reach this route only through their own centre. 2-2 additional settlements, however, have the option of reaching the route by building new, so far non-existent roads that bypass their centres. In the model, there are new access roads, transfer stops, stop-overs and settlements built along the route linking the centres. The building of these is positively affected if the stop-overs are otherwise required by the transport tech-

in the central regions of China can be realised only at higher unit costs, while lower specific social return – traffic, cost and time saving – can be achieved. In order to avoid the slow-down of economic growth, new infrastructure should be built in the peripheral areas of the country and across borders towards the most important trading partners in order to generate traffic. The New Silk Road initiative is intended exactly for that objective.

nology, for example the steam engines required stops at every 100 km to load coal and water. The transport corridor itself starts off traffic between two regions, and even forms their internal relations. This is typically characteristic for railway infrastructure developments exploring new territories.

TRANSPORT – VALUE CHAINS Value chains, transport corridors Transport systems consist not only of roads, railways and shipping routes, but also traffic organising cities, their regions, hinterlands, carrier businesses, economic and social circumstances, and the legal environment. The subsection below introduces the three decisive milestones of the evolution of land transport corridors. Model A represents a traditional space controlled by central places as described by Christaller. In the area covered by hexagons, the city in the centre of the hexagons manages and administers the area. Goods can be transported to another settlement on or inside the hexagon with the lowest possible average costs through the centrally located city between the settlements at the midpoints of the smaller hexagon’s sides. We suppose that roads lead radially from the central settlement to the other settlements in the region. When connecting two such hexagonal areas and wanting to ensure the best traffic, we have to connect the two central settlements

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The transport corridor also significantly differentiates the regions connected. The traffic in the settlements on the corridor increases, the settlements get new growth impulses, the corridor’s impact is far greater than that of traditional local relations. Settlements along the route gradually become centres. Settlements in the neighbourhood of the corridor but not linked to it, however, become peripheral and isolated. When choosing their place of residence and seat, people and businesses respectively prefer the proximity of modern transport and the opportunity to connect to it. They build their systems of relationships on it. The accessibility of the new infrastructure and the distance from it in time and space are decisive from the aspects of centre-periphery relations and development. This describes the mode of action of current motorway and high-speed railway developments. In the third phase the starting and end points of the transport corridor increasingly become gateways for the external world. The current process of globalisation broadens the regional system of relationships in many ways. The system of relationships in the case of the two regions in the model is also extended towards other regions, and with other transport modes. External relationships and increased passenger and

The evolution o transport corridors

Source: Rodrigue 2017

goods transport make the gateway cities even more central. However, the growing traffic, overcrowdedness and negative externalia make the gateway cities involve again their peripheral hinterland in the spatial division of labour in order to reduce their burdens. The new division of labour results in new economic and social frameworks. The self-sufficient, functionally independent villages and towns are revived in specialised roles. The once independent Budaörs and Százhalombatta are now functionally parts of Budapest, relieving the capital. These phases are expected to appear in the development of the New Silk Road as well. In the Western provinces of China and in the countries of Central Asia the first phase development is expected in the first 5-10 years. In Inner Mongolia, Russia, Belarus and Central Europe probably we will see the second phase, the development that transforms the internal relationships and creates peripheries within the regions. The two “end points” of the New Silk Road, the Chinese coastal cities and Western Europe, however, have global gateway functions.

Regarding the volume of trade of goods, the three megalopolises in Eastern Asia can be considered the biggest gateways globally – Shanghai in the estuary of the River Yangtze, Shenzhen and Hong Kong in the estuary of the Pearl River and Singapore in the Strait of Malacca. Their total container traffic represents 27 per cent of the world’s container traffic. As far as current traffic is concerned, the Western European ports are fragmented, except for Rotterdam. The reason behind Chinese aspirations to build a land bridge connecting China and Western Europe is that the transport and port developments in the countries regarded as most important markets are not keeping pace with these ambitions. Shortly, sooner or later the situation that the port capacity of important markets will not be sufficient to receive Chinese goods might occur. China wants to prevent this by building alternative transport routes. Maritime transport of goodss Even the shortest sea route from China to Europe, Shanghai-Hong Kong-Singapore-Suez-Genoa, takes 21 days in one direction. The whole return

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Porter’s value chain model

Main maritime shipping routes

Source: edited by author

journey takes 49 days without waiting time in ports. This is one of the three major global transport routes. The other is the Southern China Express that links China, Singapore, Thailand, Japan and the United States crossing the Pacific Ocean. It takes 9 days to get from Oakland to Tokyo, 11 days from Los Angeles to Shanghai. The return journey is 39 days. The third busiest route is the North Atlantic between Europe and North America. Despite numerous UNCLOS agreements, the sea freight transport market can be considered rather unregulated, where the largest shipping companies are European, while the largest ship manufacturers are Far Eastern. But signs of crisis generally present in the industry have been obvious for years. The bankruptcy of the seventh biggest shipping company (HANJIN) directs attention to the problems of the whole industry. These are the following: • Although 80 per cent of world trade is transported by sea, the sector has been operating at depressed price and tariff levels for a long time.

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The decrease in maritime transport prices is necessary for the accomplishment of globalisation as a process. Shipping companies are less and less capable of operating at the decreasing or depressed prices. •T he operators of the industry placed huge orders with the ship manufacturers before the 2008 crisis. The standstill and temporary downturn of international trade made part of these orders redundant. Ships were still taken over in the hope of still needing it after the crisis. But part of the available capacity is still not used, so the companies’ costs and losses are further increased. • T he industry continues to be in deficit in spite of the low oil prices, and it is a question as to what will happen if the oil prices start to increase. The size of the ships to be built is determined by the width of the Suez and Panama Canals. Thus, there is a limit to cutting costs by increasing the ships’ size and cargo capacity. • T he volume and traffic of bulk cargo has increased due to China’s growing raw material import – mainly ores –, and the volume of container cargo has increased due to the export of

Source: Rodrigue 2017

the Chinese processing industry. The volume of other goods transported has stagnated. • T here are again growing geopolitical risks affecting the main shipping routes. After a few

relatively calm years, the number of pirate attacks is again increasing on the world’s seas. Pirates are unfortunately not just film characters for sailors. They can be often encountered

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Porter’s value chain model

Source: Own edition

at seas. Two areas are considered especially infected by pirates: the Strait of Malacca and the Indonesian archipelago, and the coasts of South Africa, the Southern exit of the Red Sea, and the Bab-el-Mandeb Strait with the Gulf of Aden. The situation is extremely serious. In Somalia, named a ‘geopolitical black hole’ by Russian Vladimir Kolossov, the state dissolved already 20 years ago. The country has no internationally acknowledged government. Piracy is practically the only livelihood for a part of the coastal population. Order could be sustained on the route only by establishing an international fleet. In order to curb piracy, it was the first time that China had sent warships outside its direct Asian sphere of interest. The action that now seems to be occasional might in time become permanent if China wants to take part in maintaining the navigability of the most important oil exporting region, the Persian Gulf, and to ensure the safety of the raw material consignments from East Africa that are necessary for its industry. China, so far figured as a peaceful partner, seemingly dealing only with its internal affairs, trade and production growth,

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might eventually be forced to ensure by arms and a military fleet that its economic life remains undisturbed and its own interests are protected. The situation appears to be extremely difficult at several points of the Southern maritime shipping route linking China to Europe – in the Strait of Malacca, the Bab-el-Mandeb Strait (due to pirates), the Suez Canal (due to the internal instability of Egypt), and the Gibraltar Strait. For China – traditionally not a maritime power – there are huge opportunities in maritime shipping and trade. These opportunities are taken in ship manufacturing and shipping imported and exported goods. Still, the opportunities are limited. The majority of cargo ship capacity is not Chinese-owned, while the industry has significant surplus capacity at its disposal. Therefore China, although ambitious, cannot achieve a decisive role among the shipping companies. But the possibility, that through acquisitions (buying one of the TOP 10 shipping companies), or investments China might become a substantial player, cannot be excluded. This possibility seems more likely,

“It is in China’s essential interest to maintain the continuity, safety (especially towards Europe) and low price of maritime navigation, because it is inconceivable to deliver its exported goods without it.” because a new gigantic competitor’s entering the scene with its capacities would further erode the otherwise low profitability of the industry. It is in China’s essential interest to maintain the continuity, safety (especially towards Europe) and low price of maritime navigation, because it is inconceivable to deliver its exported goods without it. It is a crucial problem for China that the infrastructure, namely the port development plans of its trading partners, do not keep pace with Chinese plans. Thus China is necessarily interested in building a land transport corridor to Central and Western Asia and Europe as an alternative to the sea routes. This intention is underpinned by the fact that Central Asia neighbouring China is a landlocked area of the continent and farthest from the seas. Consequently, the development of the currently not very significant trade between Central Asia and China is possible only through the development of land transport corridors. The high unit costs of building the routes leading to Pakistan and Kazakhstan through Western China (where difficult terrains and high mountains cause extra costs) motivate the Chinese decision makers to include regions with the best possible economic potential in the New Silk Road. This region is Western Europe. Rail freight transport The Trans-Asian Railway (TAR) is a project to create an integrated freight railway network across Europe and Asia. The TAR is a project of the

United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). The project was launched in 1960. The objective is to provide a continuous 14,000 km rail link in South Asia, between Singapore and Istanbul. In the north, the Trans-Siberian Railway is a network of railways connecting Moscow with Vladivostok, with branch lines into Mongolia and China. There was a large railway network in China but it did not link the country to its Western and South-Western neighbours. There was no direct railway connection to Central Asia, which was at that time part of the Soviet Union. In the Southern part of Asia there were only railway lines built in the colonial era, but those did not cross the colonial borders. Thus, the goal of the UN and the South-Asian countries was to build a railway line from Indonesia to Turkey with connection options to Europe and Africa. In 1960 shipping and air travel were not as well developed as they are currently. Additionally, both modes of transport were much more expensive than today. The planned railway was expected to significantly reduce the duration and costs of transport between Europe and Asia. It would have been much faster than sea shipping, and much cheaper than road or air transport. Progress in developing the TAR was hindered by political and economic obstacles throughout almost a quarter of a century. By the 1990s, the normalisation of relations between the Asian countries improved the prospects for creating a rail network across the Asian continent. But the project of the South-Asian railway might be overridden by the New Silk Road plans, which are more to the needs of China. The TAR project’s major advantage is to satisfy the demand for transport created by the increases in international trade between Eurasian nations and to introduce landlocked countries – such as Laos, Afghanistan, Mongolia, and the Central Asian republics – into the economic and commercial bloodstream. A major part of the railway network in the project already exists, but some significant gaps remain across borders. A big challenge is the difference in rail gauge. But the TAR would not change national gauges. • M ost of Southeast Asia has 1,000 mm gauge. • M ost of Europe, as well as Turkey, Iran, China, and the Koreas use 1,435 mm gauge.

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• R ussia, and the former Soviet republics use 1,520 mm gauge. • T he railways in India, Pakistan, Bangladesh and Sri Lanka use 1,676 mm gauge. In order to ensure interoperability, mechanised facilities will be necessary to move cargo containers from train to train at the breaks of gauge. It is even a bigger problem that not only building these facilities would require extra investments, but also transport costs would significantly grow due to transhipment (terminal costs). By 2001, four corridors had been studied as part of the plan: • T he Northern Corridor, where the Trans-Siberian Railway will link Europe and the Pacific. Germany is the starting point. The corridor crosses Poland, Belarus, Russia, Kazakhstan, Mongolia, China, and the ports of the Pacific Ocean. In theory, the Koreas could also join this railway line. Due to political reasons, North Korea does not want to, and because of North Korea, South Korea cannot access the route. There are

“The TAR project’s major advantage is to satisfy the demand for transport created by the increases in international trade between Eurasian nations and to introduce landlocked countries – such as Laos, Afghanistan, Mongolia, and the Central Asian republics – into the economic and commercial bloodstream.” 138

two gauge breaks along this route: there’s one at the Polish-Belarusian/Ukrainian or at the Hungarian/Slovakian/Ukrainian border (1,435 mm ? 1,520 mm), and another at the Kazakh/ Mongolian/Russian-Chinese border (1,520 mm → 1,435 mm). • T he 9,200 km long Trans-Siberian Railway covers much of this corridor. It currently carries large amounts of freight between East-Asia and Russia and the rest of Europe. • T he Southern Corridor will go from Istanbul to Southeast Asia, connecting Turkey, Iran, Pakistan, India, Bangladesh, Myanmar, Thailand, China, Malaysia, and Singapore. Gaps exist

There are still numerous coal power stations, the supply of which is a crucial railway transport task. This generates about 2 billion tons of rail freight only from coal. If railway traffic is unreliable, it affects the country’s energy supply. The majority of freight traffic in headed from north or south. 25 per cent of the world’s railway traffic takes place in China on 6 per cent of the world’s railway lines.

at the border in East-Iran, between India and Myanmar, between Myanmar and Thailand, between Thailand and Cambodia, between Cambodia and Vietnam, and between Thailand and China. Breaks of gauge occur at the IranPakistan border (1,435 mm → 1,676 mm), the India-Myanmar border (1,676 mm → 1,000 mm), and at the Myanmar-China border (1,000 mm → 1,435 mm). Nevertheless, it doesn’t seem that in the years after the Millennium, the construction of this railway network would be beneficial for the countries concerned, or that it would mean a real alternative to maritime transport. • T he Southeast Asian network connects the countries in Southeast Asia – Indonesia, Malaysia, Thailand, Singapore, Cambodia, China, Laos, Myanmar and Vietnam. • T he North-South Corridor will link Northern Europe to the Persian Gulf. The main route starts in Helsinki, and continues through Russia – on the Saint Petersburg- Moscow-Volgograd- Baku route – to the Caspian Sea. Then runs though Azerbaijan and Armenia to Western Iran. The route continues South through Tehran to the port of Bandar Abbas.

the Chinese railway network was 21,000 km. The length of the network was 53,000 km in 1968 and 86,000 in 2008. The length of the Chinese railway network was over 120,000 km in 2016, 53 per cent of which was double track and electrified, and 16 per cent high-speed railway.

The railway network in China was built in an era when the connection with ports was a priority because of colonial rule, so railway developments were not aimed at the network itself. The Chinese railway network was sparse. After the country’s gaining independence in the second half of the previous century and then after the political opening it turned out that the railway had great political significance, and that it meant a barrier to the country’s development. The railway capacity in China is very low in relation to the needs.

The development of the transportation system became extremely important for China on the path towards modernisation. In 1949, when the People’s Republic was founded, the length of

The 10 million square metre territory of China made the airplane the major means of long distance passenger transport. The population is concentrated on the Eastern coastal area. There are more than 50 cities with a population of over 1 million in China. The distances between these are typically 100-1,000 kilometres. Large and fast-growing traffic can be effectively managed at such distances only by such space and energy efficient transport vehicles like express or highspeed railways. In China, where the length of traditional railways has been doubled since 1990, where the double track railways have grown five-fold, and where 20 thousand kilometres of high-speed railway has been built “from scratch” in the past 10 years, the question of rail freight logistics appears to be especially challenging. Today railways are competitive at distances over 200 km as opposed to roads, provided there is a choice, while they are competitive over 1000 km as opposed to maritime transport. Except for the typically short-distance transport of stone, sugar beet etc., today railways consign freight only for distances of several hundreds of kilometres. But at such distances the earlier practice of having the wagons take the return journey empty after transporting goods directly from the producer to the customer cannot be continued. (See Figure

“In 1949, when the People’s Republic was founded, the length of the Chinese railway network was 21,000 km. The length of the network was 53,000 km in 1968 and 86,000 in 2008. The length of the Chinese railway network was over 120,000 km in 2016.” 20 A) The minimisation of unladen journeys is ensured by transporting goods from producers to assembly centres, logistics centres. The long-distance scheduled freight trains operate between logistics centres. At the destination of the freight train, the local logistics centre distributes the goods to be shipped to customers. Unladen journeys take place only between logistics centres and consignors, and other logistics centres and recipients, but there are usually none between logistics centres. Besides the construction and financing of tracks, the New Silk Road railway corridor crossing several countries poses a challenge for the countries participating in the project especially from a traffic logistics aspect. Obviously, China wants to transport its own goods to Western Europe and Central Asia on land as well. But clearly, it is in no-one’s interest that freight wagons take the several thousands of kilometres of the return journey unladen. The freedoms of land transport operators that are available in the European Union – cabotage and others – are not yet provided in Russia, Kazakhstan and China. The situation is further complicated by the aspirations of logistics companies to offer complex services, like door-to-door delivery. This means that for example the Deutsche Bundesbahn, that ships goods from Germany to China, would like to deliver freight directly to the premises of the customer.

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To that end, the DB is required to have freight licence for the Chinese section of the railway. Similarly, the Chinese shipping companies should have the same licences in Russia or the European Union. At this point, however, a significant change in logistics can be expected, which is going to be forced by the New Silk Road. 80 per cent of traditional external trade takes place by sea. Loading and unloading freight ships in ports naturally gives the opportunity and place for transfer and receipt of goods. Thus, the large freight ship companies were not forced to organise land transporting in foreign countries. For example, the German Hamburg Süd shipped German goods to the port of Shanghai where they transferred them to the Chinese customer. From that point, from the moment of receipt, the Chinese customer bore all responsibility for the transportation of the goods purchased. This was probably done by one of the Chinese forwarding agents. In land transport, there’s no such point. While port cities are industrial and commercial centres in all countries, the developing border towns at the Kazakh-Chinese or the Chinese-Russian borders are not. It is evident that participating countries must lay down market and competition regulations for this route – like software for hardware – so that large scale goods transport could be smoothly operated via the railway lines to be built. In 2008 China set out a medium- and a long-term plan to build its high-speed railway network and to modernise its railway network as a whole by 2020. The goal is to expand the length of railway lines to 120,000 km including 12,000 km highspeed railway lines by 2020. By 2016 this had already been significantly exceeded, because there were 123,000 km of railway lines including 19,000 km of high-speed railway.

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The Mid-term Railway Network Plan contained four North-South and East-West corridors that would be the axis of the network. The East-West corridors would explore the Western part of the country. The aim of the lines reaching the central and western parts of China is to direct internal migration to these territories, to move village inhabitants towards the provincial centres, so that the burden of the Eastern

The enormous Chinese railway development project caused substantial demand of iron ore, cement and other construction materials in the world market. China needed iron ore for the production of rails, railway vehicles and spare parts in such amounts that it resulted in noticeable shifts at world economy level as well. China’s steel production capacity has grown since 2010

high-speed trains in operation at the end of 2015 in China. China is preparing to export domestically developed trains.

and coastal zones could be relieved. The NorthSouth corridors serve the transportation needs of the central regions and not least improve the accessibility of Beijing from all parts of the country. Due to network and traffic reasons, there are even shorter high-speed lines built between certain large cities.

by a larger volume than the whole steel industry in the United States. The world market price of steel and other raw and source materials have been increasing since 2006 practically due to the Chinese infrastructure developments.

cities with Beijing, Shanghai and Guangzhou by 2020. Travel times from all provincial capitals to Beijing are planned to be less than 8 hours. Currently there are 10,000 km of high-speed railway tracks under construction. China’s high-speed railway network is planned to be expanded to 50 thousand km by 2020. 3,500 km of new railway tracks suitable for 350 km/h speed were delivered in 2016. They want to triple this amazing performance in the 3 years to come until 2020.

• T he following goals were defined when developing the Chinese high-speed railway network: • to meet the huge demand for travel options among the population over 1.4 billion, • to balance the development of the different parts of the country, • to decrease the differences between per capita income and infrastructural development levels in different regions, • to connect each prefecture to the national express road, motorway and high-speed railway networks and at the same time establish links to the three most significant metropolises of the country: Beijing, Shanghai and Guangzhou, • to ensure fast access from the agglomerations to cities and factories in provinces outside the densely populated Western coast, • to implement an energy efficient and widely affordable means of transport in order to possibly curb the motorisation boom. The average travel time of long distance passenger trains decreased by half during 10 years. Over 19 thousand km high-speed rail lines have been built so far. 12 thousand km can be used by trains of a speed of 350 km/h. 7 thousand km are suitable for a speed of 250 km/h.

The railway stations serve not only high-speed trains but also traditional trains. Additionally, these stations have traditional city gate functions where means of local transport are available as well. They have optimal connections to suburban and inner city metro and bus lines. These transport a volume of passengers that is simply unimaginable for the European mind. Railway stations in large cities are designed to manage huge passenger volumes travelling by high-speed trains of fairly big capacities. In a second-class wagon of a Chinese high-speed train there are 5 seats in a row, and 4 seats in a first-class one. So a train set with eight wagons has over 600 seats. If two sets are joined, it means more than 1,200 seats. In order to avoid congestion, it is compulsory to have a seat reserved. China has bought high-speed trains from several countries through joint ventures. China and its commercial partners agreed in the sales contracts that the companies delivering the first batches – Daimler-Benz/Siemens, Alstom etc. – manufacture and assemble them in their own factories abroad (Daimler Benz 2017). But the other batches will be manufactured and assembled in Chinese factories in the framework of off-set programmes. There were over 1,000

At present, China has the longest high-speed railway network, that is being expanded even today. High-speed railway links are planned to connect all provincial capitals and prefectural level

It is no longer a question whether China is willing and capable of building the railway lines within the scope of the New Silk Road. It is definitely capable; in Asia, Africa and Europe for now, plans suggest. China has the technology, money and capacity available for it. Compared to internal developments within China, the investments planned in foreign countries do not seem to be too significant. But they will really be significant in their impact, in delivering Chinese goods to the markets, and also in obtaining the resources for China. However, looking at the New Silk Road railway section in China, we see that all the three directions towards the Russian, Mongolian or Kazakh borders will be only simplified versions of the Chinese high-speed railways. Tracks are planned to be suitable for passenger trains of a speed of 250 km/h and also freight trains. The reason behind this is that these lines are primarily built for freight trains. But it is not worth building traditional tracks newly, even for long distances.

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Length of motorways in the United States and China

Travelling on the Trans-Siberian Railway

Source: http://regi.1000ut.hu/alt-transzvasut.htm

Air transport

Source: Rodrigue 2017

Thus, railway tracks used by both 250 km/h speed passenger trains and freight trains remain the viable option to the Chinese border stations. The expectable passenger and freight traffic is absolutely uncertain. That is why it is, for the present, not worth building separate lines for high-speed passenger and freight traffic. The possibilities for further developments will be determined by the track gauge that the countries of the former Soviet Union will use when building the New Silk Road sections in their territories. Currently it seems likely that Kazakhstan, Russia and Belarus will build and modernise broadgauge tracks that connect to the local lines. Road transport Although road transport is the leading means of land goods transport, in my opinion it probably will not play a major role in the New Silk Road. The distance between Western-Europe and China is too long. The distance of over 7,000 km between

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Budapest and Beijing can be travelled by car in over 100 hours without stops and rest. If a driver and a freight company wants to adhere to all regulations concerning working time, rest periods, speed limits etc., it would take two weeks in one direction. Although it could be feasible, currently it is not very likely that masses of cargo would be transported by 10 thousand trucks per year. China, at the same time, is interested in constructing the New Silk Road also as a motorway or express road. Despite long distances, there still are destinations that are best connected via land transport, especially from China. Such countries are: Pakistan, Afghanistan, Iran and possibly the Trans-Caucasian republics. It is very much imaginable that the future land Silk Road will perform 2-3 thousand kilometres’ distance interregional or international trade within the same country or between neighbouring countries. In case of emergency and disaster, appropriate roads might be a useful alternative to railway or maritime transport.

Air transport is the most important means of passenger transport in the New Silk Road project. There are several reasons for that. Railways are not competitive at such distances. Even train tickets are not necessarily cheaper than plane tickets. Also, rail transport takes much longer. It is not tolerated that a business trip should cause time loss with several days spent on the train. Employees do not have as many days of paid holiday that they could spend two weeks, or minimum 5-6 days on a train to get to their destination and back, unless it is otherwise the main goal of their travelling. While travelling by train, there are only the dining-car, maybe the shops and buffets of railway stations available for the passengers to get food. This also increases the cost of travelling by train. To compare the costs

of travelling by air and by train, let’s look at the data above about the costs of the Trans-Siberian Railway (which can serve as the only reference at the moment) and the flight costs (below) for the same distance. Considering these data, air transport seems to win the competition between air and rail transport. Air transport is not only faster, butconsidering ticket prices for return journeys – it is even cheaper. Starting from Moscow, best price plane tickets are cheaper to other Russian cities and Beijing than train tickets for a sleeping compartment with four berths. This is why travelling by train for such distances will remain an exotic pastime for rich tourists, and in no way become a part of mass tourism or business travelling. Starting from Berlin, a plus day – or 24 hours on the train – has to be spent for the journey.

Average daily number of direct flights between the major cities of Western Europe and the Far East, compared to New York

Source: http://regi.1000ut.hu/alt-transzvasut.htm

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Regional characteristics of the global aviation market

Boston, Washington. Philadelphia, Denver, San Francisco, Houston have one-third or one-fourth of New York ’s Europe-bound traffic. Recently cities like Seattle, San Diego, Salt Lake City, Detroit, Minneapolis and Tampa have joined in. London has a prominent role in Europe in handling traffic between Europe and the Far East. London’s system of relationships is especially important with two former British colonies, the dynamically developing Hong Kong and Singapore. But Singapore also carries transit traffic to Australia. Considering this, Hong Kong’s dominance in the relationships between Europe and the Far East seems to be even more overwhelming. When analysing the traffic of European airports, we see that London, Frankfurt and Paris play fundamental roles, and that their Far East traffic is generated typically by business travels.

Source: Rodrigue 2017

If we look at the possible air routes of the New Silk Road, Europe’s busiest airports and cities can be primarily considered as gateways: • London with Heathrow and Gatwick airports • P aris with the Charles de Gaulle and Orly airports /Frankfurt/ • Amsterdam with Schipol airport • Frankfurt am Main and • Munich. The data show that the volume of air traffic between Western Europe and the Far East is currently far from the volume of air traffic on the Trans-Atlantic routes. From the North American cities, only New York is included in the table, because it is undoubtedly the busiest node. Traffic of similar magnitude is handled by Chicago, Atlanta and Los Angeles. Boston and Washington

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Currently, the airports that opened after the turn of the millennium – Helsinki, Zurich, Prague, Vienna, Milano, Rome, Madrid and Barcelona – play a much smaller part in traffic to the Far East. Barcelona, Vienna and Rome are very popular destinations for Chinese tourists. Helsinki entered this market earlier with business travels and cargo transport generated by Nokia. Prague joined because of surplus capacity. Traffic growth depends on several factors. The IATA traffic growth forecast says that air traffic volume growth depends on the following: living standard (35 per cent), changes in the population (17 per cent), expansion of trade (35 per cent), plane ticket prices, market regulation (13 per cent). According to the IATA forecast, the two most dynamically developing aviation markets in the next 20 years will be domestic aviation in China and India. The anticipated annual growth rate is over 10 per cent for both markets. By comparison, the annual growth rate of air traffic between China and Europe, and China and North America is expected to be 5-6 per cent. What concerns Europe, a number of airports – London Heathrow, Frankfurt is struggling with capacity insufficiencies. It is partly because their runways have reached the technically possible maximum capacity of take-offs and landings, and also due to noise protection reasons neither spatial expansion nor temporal expansion into the night

hours is possible. The night traffic of airports is strongly restricted in Europe. Although new runways are planned to be built in both London and Frankfurt, the growth of Far Eastern traffic may probably increase the traffic of airports that currently have capacity surplus like Madrid, Warsaw, Helsinki or Budapest. Due to its geographical location, Moscow plays an intermediary role in serving the traffic between Europe and the Far East. But Russia’s possible part in the growth of the region’s traffic is limited by the ticket prices between Western Europe and Moscow that are high in comparison with the international prices, and also by the limited openness of the Russian aviation market. The situation is different with Turkey and Dubai. Both countries attempt to enhance their own geopolitical significance by developing air transport, national airlines and the most important national airports. In Turkey, the foundation of the development of the Turkish Airlines lays in the country’s population of 80 million and the Kemal Atatürk Airport that is designed to receive 100 million passengers. Today the airlines have 150 destinations from North America to the Far East. Dubai’s airlines, the Emirates, also cherishes similar ambitions. Dubai wants to become the busiest logistics centre in the world. But, as opposed to Turkey, Dubai has a very small population, they cannot rely on that. The comparative advantage Dubai has come from crude oil extraction and oil refinery, and the fact that the national airlines can buy fuel at very low prices. Kerosene can be bought in Dubai for 10-15 per cent of the price offered for other airports outside the Middle East. This ensures a huge cost advantage. The Emirates decided to overcome airport capacity shortages by providing the largest passenger airliner, the double-deck Airbus 380 for intercontinental journeys. But, most importantly, both the Turkish Airlines and the Emirates use the business model of Singapore Airlines by generating a major part of their traffic and revenue from the masses of transit passengers. For certain periods these three airlines offered/offer the best prices between London and Beijing. The New Silk Road becomes

wider – as far as air transport is concerned – in the direction of South-East Asia because of these airlines. The busiest airports of China are Beijing, Shanghai and Hong Kong. Traditionally, the largest airport with the biggest international and business travel traffic, and largest road network is in Hong Kong. This is partly due to the liberalisation policy of the British in the 1980s, because the aviation market is extremely open to foreign airlines compared to any other market. But its growth in terms of size and traffic volume is limited by lack of space. New runways could be built only through land reclamation. The airports of Beijing and Shanghai were built primarily for domestic traffic. Due to the size of the country, the domestic aviation market is quite significant, while international air transport is secondary. Considering current trends, Beijing airport has been the busiest domestic and international airport for a long time. In 2016, the volume of traffic at the Beijing airport was 94 million passengers, at Hong Kong 70 million, at Shanghai 66 million. The Chinese domestic aviation market is liberalised and beside the state-owned airline there are province-owned and private airlines operating as well. The growing demand for aircraft has been fulfilled by purchasing Boeings and Airbuses so far. But today China has a domestically developed and manufactured aircraft. Currently it is going through European approval processes. China has regulated its international air traffic and granting of landing permits on the basis of bilateral air transport agreements. Hong Kong has so far been an exception to the regulations of international air transport. This is partly the reason why it can play the role of a gateway to China. It is of key importance for the development of outbound international air transport from China how successfully the leaders of the two largest cities and their airports, and some provinces can lobby for opening the market and for expanding the landing permits of foreign airlines, so that the international traffic of their airports could be boosted. The expansion of passenger and freight traffic may force this step in the not-so-distant future.

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THE FUTURES GEOGRAPHY OF THE NEW SILK ROAD

Eurasian countries of the New Silk Road

Authors: István Tózsa, Eszter Monda, Gergely Tyukodi

This study contains a methodological approach of futures geography to illustrate the way, the objectives and the results along which the application of a futures studies toolkit can work from Hungary’s perspective in a real situation – in the New Silk Road global project, declared by China, which is practically a new overland trade route between Europe and Asia. The study covers the countries lying in the zone of the two Eurasian OBOR route networks. The countries of the northern zone include Hungary, Ukraine, Russia, Kazakhstan, Mongolia and China. The countries of the southern zone include Hungary, Serbia, Bulgaria, Turkey, Armenia, Azerbaijan, Iran, Turkmenistan, Uzbekistan, Tajikistan, Kyrgyzstan and China.

“Our aim is to identify such geostrategic anchor points upon which the country can solidly build in the near future; in addition, to find new break-out points in the field of global and eastern trade relations.” The implementation of the Silk Road belt would mean potential opportunities in foreign trade and geostrategy for Hungary. There is, however, a high number of changing circumstances in the economic and political environment, making preparation for the future difficult. Hungry, being a small country, is in a vulnerable position, therefore it is important

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how closely it can connect economically to the countries in its environment. Our aim is to identify such geostrategic anchor points upon which the country can solidly build in the near future; in addition, to find new break-out points in the field of global and eastern trade relations. As a lot of factors play a role in the New Silk Road belt (such as political relations between countries, development level and economic status of specific countries, infrastructure deployment), the Silk Road belt is interpreted in the narrower sense in our methodological research, and we focus on its role in trade. If we seek to quantify the commercial significance of the Silk Road belt, export and import data provide the basic data for analysis to prepare a prognosis and explore a connection between Hungary and the countries lying along the OBOR route. The Data Atlas (KNOEMA) website is an appropriate data source, which contains the data of the years from 2004 to 2015, broken down by several indices.

Source: edited by author

by collecting data, thus effective preparation for the future lies only in exploring alternative ways. Scenario building is one of the most suitable and widely-spread method to create alternative, different futures. The approach is based on forecasting, quantitative methods, the so-called trend extrapolation approach, which determines the future on the basis of continuing trends of the past, and answers the question as to what will happen. This scenario has become known as BAU. The approach appearing in foresighting methods, the so-called exploratory scenario seeks the answer to the question as to what could happen. Exploratory scenarios require creative (“out of the box”) thinking, in which a wider range of changes are anticipated.

SCENARIO BUILDING As our world has accelerated, and changes have become part of everyday life, foresight, a strategic thinking capacity to react proactively to changes has recently become increasingly popular and frequently applied. Due to R.I.D. changes, the future is less and less predictable, therefore the uncertainty inherent in the future, unlike earlier, cannot be appropriately reduced

When examining changes, it is important to consider events that might bring about radical changes, although are unlikely to happen. Futures studies call these events wild cards, the effect of which can be negative, positive or mixed. When thinking in a longer term, we must examine the signs that today are present only in traces, but may as well develop into major trends in the future. These signs are identified as weak signals by

futures studies. In our study, we focus on changes, therefore we think in alternatives, for which scenario building is an appropriate method. We are conducting the research with the application of the scenario method, which is rather supportive if one wishes to build complex, alternative scenarios of a research domain, in the form of expected and other alternative futures. Several methodologies of scenario building are known, there is no single suitable, universally applicable logic. The steps of the methodology applied in the study are as follows; • C ollecting data: collecting factors influencing the future of the Silk Road; • D ata analysis; making forecasts; • E xamining relationships: correlations between export and import factors; • O utlining alternative possible scenarios; • R ecommended action plan. On the basis of current trends, we are building a most expectable scenario for the OBOR routes, which presents the trade relations of Hungary

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and the countries along the route and their role of supporting each other for five years, that is today, in 2017 for the next three years, relying on data from 2005 to 2015. The predictable future is defined by the extrapolation of trends on the export–import data sequences and calculated with the least square method. Having calculated the predicted future values the study focuses on the degree of the commercial support between Hungary and the countries of the New Silk Road. The commercial relation is calculated by examining the predicted future values of the countries along the OBOR route and Hungary. We use qualitative techniques to define the alternatives differing from the foresighted future. COLLECTING DATA We narrowed the scope of data to the examination of the export and import data of Hungary and the OBOR1 and OBOR2 regions. As our study is conducted for methodological development purposes, it is not aimed at examining all factors, but those indices were highlighted that are the most relevant from the study’s perspective. The export and import data of the world’s countries are available on the webpage of KNOEMA. We selected food, goods, services and energy carriers, as these are the major categories that have significant roles in the Silk Road project. Furthermore, freedom of press, GINI and GDP/main indices were added to these categories. ANALYSING AND FORECASTING DATA We prepared a five-year forecast for the 11-year long (2005-2015) data sequence of KNOEMA, by having calculated the trendline extrapolated on various functions. The following trendlines are extrapolated onto data sequences with the least square method: • L inear function extrapolation shows the degree of even change. • T he polynomial function is well applicable to fluctuating data. • A ccelerating change can be forecasted by exponential function extrapolation. • T he extrapolation of the logistic function can produce correct results in the case of time sequences with saturation points.

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• T he extrapolation of the hyperbolic function can be suitable for decreasing time sequences.

“The uncertainty inherent in the future cannot be appropriately reduced by collecting further data, thus effective preparation for the future lies only in exploring alternative ways.“ EXAMINING RELATIONSHIPS We are outlining the relationship between Hungary and the countries of the OBOR 1-2 zones relying on export and import data. We assume that the exports of an OBOR country mean potential trade relations, if they become Hungary’s imported goods or services. Along the same logic, the exported goods and services of Hungary as the imports of the OBOR country strengthen the trade relations of the two countries. Due to the demand and supply needs, a situation of commercial support can evolve between the countries. Support here means the potential, the possibility space inherent in the export and import trade of the countries in the zone.

then the level of support from the perspective of the OBOR country is 13/25 = 0.52. If we look at it from Hungary’s perspective, this value is 25/13 = 1.92. First, we compare the values to Hungary, as we aim to explore supply and demand needs from Hungary’s perspective, therefore the formula of the index is “export value of OBOR country / import value of Hungary”, or import value of OBOR country / export value of Hungary”. In terms of the relationships between the two countries, we examine the expected size of the market for the Hungarian export in the OBOR country, as well as the Hungarian market demand for the export of the OBOR country. Second, we examine the po-

strategic decisions can be made. As we will see through the analysis and the example presented in the previous chapter, mathematical-statistical forecasts are not sufficient for a comprehensive exploration of the topic, but they will absolutely do as starting points. In order to achieve the goal presented, we follow the methodology described in the previous chapter: we will present available economic indices, and the predictions of which enable us to draw conclusions on the nature of particular alternatives. When analysing economic indices, the following data are examined in full detail:

tential opportunity Hungary’s export and import offering presents from the perspective of the OBOR country. In this case the data of the OBOR country are included in the denominator, thus the formulas of the two indices are “Hungary’s import value / the export value of the OBOR country,” or “Hungary’s export value / the import value of the OBOR country”.

• p er capita GDP of the given country, on the basis of which we can draw conclusions on the predictable economic development opportunities of the countries;

The level of support of the two countries – in this methodological experiment – is based on four indices (food, goods, services and energy carriers). Due to the enormous trading activity of the country, the data of Chinese export and import have been adjusted by the valid data of trade directed towards other regions published by the Chinese Statistical Office for 2011. Therefore, in the case of China’s export a multiplier of 47.9 per cent, and in the case of import a multiplier of 36.9 per cent was applied. It did not affect significantly the analysis of opportunities. OUTLINING SCENARIOS

It is not a rule that two countries being neighbours or in the same zone purchase a given item from each other, that is why we use the terms potential and possibility space. The level of support is defined as a figure greater than 0, where 0 indicates the lack of relationship, and 1 indicates an exact match (e.g. the food export value of Hungary is 25, and the food import value of an OBOR country is 25), and a value greater than 1 indicates potential opportunities, which are not currently exploited. The level of support can take 0 or a greater value, depending on the degree of data matches. If Hungary’s food export value is 13, and the import value of an OBOR country is 25,

BAU scenario with the analysis of time sequences When analysing the import and export data of the BAU scenario, we analysed the above-mentioned data of the KNOEMA database. In order to draw a qualitative conclusion between the two OBOR routes, we prepared a forecast of various indices with mathematical-statistical methods, and analysed that. In the case of the BAU scenario, what basically must be presented is the future opportunities offered to Hungary by the OBOR1 and OBOR2 routes, on the basis of which

• g oods and services exports and imports of the given countries, as the Silk Road project primarily explores the opportunities of trade routes between countries, and thus the economic relations between countries; • w e will pay special attention to food and energy export and import, as both areas are of crucial importance for a given country, and their trade can be a prerequisite for conducting other commercial activities. These two aspects are important for Hungary, too, since the postTrianon territory of the country is poor in energy carriers, but the physical geographical environment of its agriculture is the best of the world’s continental agri-environments. We applied the methodology used for data analysis under the following conditions, which allow only a limited assessment of our conclusions. The database in use contains commercial data gathered from 2004 to 2015 – but there were other data in exceptional cases – and in the case of certain countries, no complete data sequences for comparison were available for some specific points in time, or there was a one- or two-year difference between the available data sequence and the time period indicated. In these cases, in order to calculate the necessary indices, we approximated the missing data with the average of the next known year, which

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slightly distorts the results, but supports comparisons and the conclusions drawn on the basis of them, and are adequate to demonstrate how the methodology works. In the specific forecasts, the data applied in this way are marked. The quantity of available, comparable data is questionable mostly from the methodology’s perspective, as it is a condition of mathematicalstatistical methods to work with adequately long data sequences. The more we know about the present and the past – especially the recent past preceding the given period or era – the more relevant and reliable conclusions can be drawn about the future, since the past, from a certain

• a t the same time, from the data of the past, the conclusion can be drawn whether the country itself has the capacity for greater performance.

point of view, determines the future, especially within a given era. Despite the assumptions and limitations presented, the following conclusions can be drawn:

On the basis of analysing the possibility space, we have arrived at the conclusion that both OBOR routes have certain advantages; on the northern route – although it passes through less countries – trade volume between countries is higher, thus it offers a great opportunity for the country, while the data of the southern route demonstrate that the support and the rise of the route offers an opportunity for a larger geographical unit, for more actors.

Regarding the economic development of specific countries, we can observe on the basis of the analyses that forecasts have extremely high standard deviation in the case of several countries, even in cases when the R2 indices measuring how trendlines match factual data were very close to each other. Therefore, forecasts based simply on mathematical-statistical methods often had to be supplemented with other expert methods. The weight of recent years, that is, its determination on the future, is approached differently by each trendline in use: for example, the exponential trend generally amplifies the changes of recent years, but the linear trend tends to contribute less importance to them, similar to the moving average. In order to draw relevant conclusions, we examined in each case how the forecast prepared with the index showing the highest significance level (R2) matches earlier factual data. The main conclusions drawn from such forecasts are as follows; • T he available time sequence data show that another branch of the global economic crisis has reached the region, as the data are below the level of earlier years in many cases; • t he data referring to the crisis do not reveal how permanent this new wave will be, or whether this setback is just temporary and is a result of some kind of shock, or whether a structural problem has occurred, requiring a longer-term, larger-scale rearrangement;

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Table 1. Possibility space on the OBOR1 (northern) route for Hungary

These questions can be answered only with qualitative methods, by conducting further researches and analyses. Another possibility is to find identical elements displayed in different alternatives, on the basis of which cornerstones of the strategy can be placed. If an event or phenomenon appears in several or all alternatives, it must be expected, whichever alternative is realised; that is, the phenomenon has a high probability of occurrence.

The level of support was defined as 0 or a value greater than that. 0 indicated the lack of relationship, 1 indicates an exact match, and a value greater than 1 indicates potential opportunities, which are not exploited currently. The first three rows of Table 1 show the demand for goods exported by Hungary in the given country (“import value of OBOR country / Hungary’s export value). Russia and China, because of their economic power, have values much greater than 1. While Mongolia does not represent much opportunity for us, Ukraine and especially Kazakhstan can be potential trading partners. Hungary can become a stronger trading partner of these two countries through its goods and services exports. The values in rows 4-6 in Table 1 show the expected demand for the export of an OBOR country on the Hungarian market. (The possibility space is calculated as “Export value of OBOR country / Hungary’s import value”.) The values of Russia and Kazakhstan are higher than in the case of import demands, but there are no significant differences. If the same route is examined from the perspective of the OBOR country, we can see that Hungary

Source: edited and calculated by author based on KNOEMA database

Table 2 Possibility space on the OBOR1 (northern) route from the perspective of OBOR countries

Source: edited and calculated by author based on KNOEMA database

does not mean a significant opportunity for the countries which are potential for it (see Table 2). We can see that Russia’s and China’s values greater than 1 indicate that their market is much larger than the Hungary’s exports. In the case of other countries along the OBOR1 route Hungary could be an attractive exporter for Mongolia. Hungarian export items could also be suitable for Ukraine and Kazakhstan, although their potential decreases to some extent over time. In the case of items exported from other countries, similar values can be observed both in terms of the country and of total values. It is worth examining the product- and service-level factors to find the reasons for extreme values. In terms of energy carriers, Russia, Kazakhstan and Mongolia’s export is remarkably high. In addition to Mongolia’s

high energy export, also the value of import is high, therefore it is worth examining the type of the energy, to see what is demanded and whether it offers a potential opportunity for Hungary – perhaps by supplying equipment, technologies, innovations required for energy production. On the southern route, China’s value remains unchanged (see Table 3). Armenia, Tajikistan and Uzbekistan do not mean considerable commercial opportunities for Hungary. The role of Turkmenistan and Kyrgyzstan as import countries might grow by 2020. Especially Turkey, and later Iran could represent a market on which Hungarian goods are potentially needed. Turkey could be a potential, major trading partner primarily in services and goods, and to some extent, food products.

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Table 3 Possibility space on the OBOR2 (southern) route for Hungary

Source: edited and calculated by author based on KNOEMA database

If we look at the results from the perspective of OBOR countries, we can calculate with values below 1 in the case of Turkey and China on the southern route (see Table 4). For Turkey, Hungary with values around 0.4-0.5 still can be an attractive trading partner. Hungary could represent a prominent trading partner especially for Azerbaijan, Kyrgyzstan, Armenia, Tajikistan and Turkmenistan (see Table 4). Iran and Turkmenistan export a considerable amount of energy, while Bulgaria, Kyrgyzstan, Tajikistan and Ukraine need significant energy imports. Both routes have similar total values, therefore there is no significant difference between the southern and the northern route. With further analyses, it can be examined what opportunities these routes offer to the countries of the particular routes, which would provide more evidence on the degree of support, but in this study, we primarily examined the opportunities offered to our country. However, it is also an important aspect, which supports the fact that, beyond quantitative factors, qualitative factors should also be examined and transformational futures, not so evident from data, should also be sought and identified.

people lagging behind digitally, education and the digital development and spread of more robust systems in order to make Hungary an attractive environment also for foreign enterprises.

Transformational scenario with the analysis of weak signals, wild cards and trends Weak signals and wild cards might modify and shape the range of products and services

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Table 4 Possibility space on the OBOR2 (southern) route for OBOR countries

participating in the Silk Road belt, and thereby the role of Hungary. The product or service import and import factors that are currently relevant and important might change in the case of a transformational future. By transformation, we mean a digital transformation in which internet spreads radically quickly, resulting in the expansion of the digital market, and new opportunities open up for geographically disadvantaged areas, provided they offered intangible assets or services before. High-level, state-funded education or individual training, digital literacy and the good command of English are required to seize this opportunity. Massive Open Online Courses (MOOC) offer opportunities for self-learning. This scenario increases the service export and import factors, and decreases the goods export and import factors. The spread of internet can further improve the press freedom index as well. As the dematerialisation of goods intensifies, less shipping is expected, and the value of energy carrier export and import is likely to slightly decrease. This scenario favours software and hardware companies, the participant of the industry 4.0 value chain, and enterprises based on digital technology. The government can benefit from this scenario if it pays proper attention to the training of

Responsible scenario with the analysis of weak signals, wild cards and trends The responsible scenario is an alternative that puts emphasis on environmental protection and community interests, and seeks to find a consensual solution. The communityâ&#x20AC;&#x2122;s interest is to decrease economic homogeneity; therefore, the decrease of the GINI index is expected. A consensus-based future can be created only in a future in which the members of a community can express their views and, based on these, can find their common points and can harmonise different opinions. This future favours the increase of the press freedom index. In order to promote environmental protection, the government should pay special attention to the diffusion of green energy, which results in the decrease in the export and import value of energy carriers. Local farming, connecting primary agricultural producers and the market, reducing transport, local buying will become increasingly important. Therefore, the export and import values of goods and food products are expected to drop. The more responsible a country is, the more it is able to be

self-sufficient, to use the renewable energy inherent in its natural resources, and to reduce food and energy waste. Digital literacy has an important role, as paperless offices and administration are important for avoiding waste. Furthermore, digital literacy promotes tele-working and parttime employment, which contribute to reducing and optimising travel. If employees do not work simultaneously, traffic congestions could be avoided. This scenario does not seek to increase export and import values, but to transform them along values, to shape a new mindset, to increase the quality of life, in which it attempts to create a cleaner and more liveable world. If this scenario materialised, wild cards such as a nuclear plant incident, or trends such as climate change, would be less likely to happen. In this scenario, the emergence of the Silk Road is not as necessary as it is in the previous scenarios, unless the Silk Road is implemented by environmentally-friendly means of transport; furthermore, the Silk Road can take only the role of being an instrument of crossborder cooperation, and not being implemented only for economic purposes. RECOMMENDED ACTION PLAN The BAU scenario indicates that the data analysis has revealed some currently unseized opportunities, and the analysis of the possibility space

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between Hungary and the OBOR countries is also visible. The alternatives call attention to the fact that the possibility space can be used but we have a choice which one we want to implement. Implementation depends on consciously identifying some values important to us and develop our strategy in line with them. Whichever alternative we will choose, the development of digital literacy of citizens will be an important aspect. Fortunately, the Hungarian government has already had several initiatives to implement this, such as “Narrowing the Digital Gap” – GINOP 6.1.2.-15 high-priority project. Digital transformation is almost a prerequisite, but for the implementation of the transformational future, such innovation environment is required that promotes the adoption of new technologies, and strives for international recognition. Key provisos include ensuring the Hungarian legislative background, reducing administrative burdens, facilitating the operation of enterprises, incubating new ideas. Promoting environmental protection poses a challenge not only to Hungary – primarily through the development and import of innovations – , but it is a compulsory task to be resolved by the entire world, which is possible only with cooperations and agreements between nations. Realising this means the greatest effort and the greatest advantage. The government must decide what to concentrate on in the main alternatives, and how the various concerned groups can be involved, motivating them for support and participation. The realisation of alternatives is definitely facilitated by participative methods of futures studies. FORMULATING CONCLUSIONS AND FURTHER DEVELOPMENT PROPOSALS The reason why in our study we chose the OBOR1 and OBOR2 New Silk Road zones for examination is that these are the two variations of the numerous routes of the Chinese New Silk Road encompassing sixty-four countries, the so-called Iron Silk Road, which can give Hungary the role of an economic gate. In the “New Eurasia Land

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Bridges” system of the Chinese transcontinental railway development, via Kyiv (and Budapest), Hungary functions as the eastern gate of the European Union (this is the oBOR1 zone in our interpretation). The other, southern OBOR2 zone is the Central-Asian track in the European transcontinental (high-speed) railway network, which gives Budapest a secondary EU gateway role within Europe via Istanbul–Sofia–Belgrade until the accession of Serbia. The other New Silk Road route zones bypass Hungary. In our study, we sought to harmonise quantitative and qualitative techniques. The Silk Road project is influenced by an extremely high number of factors; therefore, the scope of data was narrowed to the level of export and import data. Although the analysis of trade relations between countries is not an objective base, we should remember that political and geopolitical implications have at least as much significance as commercial factors do. As the Silk Road would be a major geopolitical force field, it is necessary to complete our analysis from this perspective. Quantitative data analysis was expanded with such a qualitative approach that emphasises discontinuity. In the future other than the one suggested by the data, we primarily examined the values of a digital economy and sustainable development. It is highly recommended to adopt a multilateral approach when examining the topic. We regard the expansion of the analysed factors and scope of data as the most important development pathway, as our study was conducted for methodological purposes and we had only a limited source of data available. When analysing data, we recommend the calculation of expected minimum and maximum values with a statistical programme, which is recommended to be assesses by a team of interdisciplinary experts. Consulting the interdisciplinary team in writing or orally would be ideal for exploring and analysing weak signals and wild cards, which would reveal alternatives different from the predictable ones.

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THE NEW SILK ROAD AND THE ANCIENT EURASIAN CIVILISATION Author: Dr. Atilla Grandpierre

After the ancient-medieval Silk Road, more and more details Road have been revealed about the existence of the prehistoric, 40,000-year old Silk Road, which was the main artery of a surprisingly consistent and surprisingly high-level culture. The prehistoric Silk Road was created by the ancient Eurasian high culture, which had preceded the Mesopotamian civilisation, and the exploration of which can provide considerable help to build an ecological civilisation. Our article brings the most important element of the ancient Eurasian culture, its scientific world view closer to the readers, to facilitate the building of the New Silk Road, the One Belt, One Road and to highlight its uplifting, historic significance.

40,000-YEAR LONG HISTORY OF THE PREHISTORIC SILK ROAD In the region of the later Silk Road connecting the Atlantic Ocean with the Pacific Ocean, the whole and the sites of occurrence of the depictions (e.g. cave paintings, Venus figurines) remained from the Upper Palaeolithic display remarkable uniformity. Scientists have drawn the conclusion that religion and cosmology in this vast Eurasian region has been basically unchanged, consistent and continuous for over the past 20,000 years. Most researchers now refuse the long assumed “primitive” thinking of prehistoric man, and instead acknowledge that in the Upper Palaeolithic man followed patterns of thinking similar to the ones today. In the Upper Palaeolithic, the religious experience of mankind formed a whole with the knowledge acquired about the Cosmos, there was no difference between science and religion, both were determined by a harmonious, cosmic world view. In the Cosmos-based Eurasian culture cosmology, philosophy, religion and mythology were basically coherent until the 1st millennium BC, the

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emergence of Western civilisation. From the Carpathian Basin to Central Asia and the Pacific Ocean, folk tale researchers talk about a coherent Eurasian folk tale continent. The still exiting shamanisticcosmological roots of the Hungarian and Chinese folk music stem from the view that music is a part of Nature, and is closely integrated to cosmology. With state-of-the-art mathematical methods, ethnomusicologists have established that the ancient layer of pentatonic folk music must have had the same level of development at least 12,000 years ago. As historian of religion J. Bruce Long said, the ancient Eurasian high culture was the one that developed the notion of cosmic law, which meant the principle designating the arrangement of the things of the Universe, their most general nature. In human behaviour, this notion was used to denote reality, truth, law or human right and justice – and in an extended form, the whole range of social and ethical norms on which society is built. The principle of popular sovereignty, known in the ancient Hungarian legal system, as well as the idea of the Mandate of Heaven in ancient China both stem from this idea of the ethical world order. Clothing also dates back

at least 30,000 years in this whole region. We seem to have all the reasons to talk about an ancient Eurasian high culture in this region which is today still unknown to the public awareness. In his book Silk Road Encyclopaedia, Jeong Su-Il, a prominent South-Korean expert of the Silk Road, has established that a prehistoric Silk Road connecting Europe with East Asia along the temperate zone, stretching from the Atlantic Ocean to the Pacific Ocean, along which, for example, the famous Venus figurines can be found, existed as early as the Upper Palaeolithic. The oldest Venus figurine from around 40,000 BC was found in Central Europe, around the headwaters of the Danube, near Hohle Fels. In the vast zone ranging from Western Europe to Anatolia and the Pacific Ocean, more than 250 highly elaborate, in many respects similar Venus figurines have been found, the similarity of which indicates the existence of a high-level, coherent culture. Many of the Venus figurines are of religious nature, others exhibit the clothing and hairstyle of the age, researchers have found. It remains a mystery, but these Venus figurines displayed extraordinary uniformity and consistency for tens of thousands of years. The prehistoric Silk Road was not only a trade route, but the global circuit of a coherent ancient civilisation and culture, notes the Silk Road Encyclopaedia in the Steppe Road entry. The age of the prehistoric Silk Road dates to 40,000 BC, on the basis of the age assessment of the Venus figurines. As the beginnings of the historical Silk Road are marked by the rise of the Han Dynasty around 207 BC, the prehistoric Silk Road embraces an unusually long time span of 40,000 years. This means that a highly developed civilisation had existed before the first civilisations known today – the Mesopotamian, the Chinese, the Indian and the Egyptian. Exploring this ancient civilisation is of historic significance. Here, we primarily aim at highlighting the world view of this ancient culture, because it has the greatest significance to building an ecological civilisation. We thoroughly examined the Eurasian ancient culture in the Silk Road region based on four natural sciences: physical geography, anthropology, genetics, archaeology, and six humanities: folktale research, ethnomusicology, linguistics, history of religion, ethnology and the study of national identity in a

separate book. Hereby we present the most important facts on the basis of which the ancient Eurasian civilisation can unfold in its own context and all its glory. The world view of the prehistoric Silk Road, as set out below, was more profound and more complete than the modern one. It indicates the fact that exploring the world view of the ancient Eurasian culture is vital for the progress of civilisation. THE PREHISTORIC SILK ROAD AND THE IDEA OF POPULAR SOVEREIGNTY As it is written by historian of religion, Mircea Eliade, life in ancient Eurasia had a sacred nature. The most formative experience of man living in harmony with life and Nature was the sacred experience of cosmic order. The faith that the entire Universe was built and governed on the basis of natural and ethical order enabled human beings to resolve their intellectual, moral and spiritual life crises individually and collectively. A substantial feature of the sacred ethical world order is the idea of popular sovereignty that lies outside the perceptual boundaries of profane modern civilisation. The idea of popular sovereignty means that the people, as an integral whole, is destined to govern its own life, on a basis which is in line with the ethical order posed by the sacred, that is eternal, cosmic world order.

All the indications are that the idea of the sacred kingdom was present in ancient Eurasia in the Upper Palaeolithic, since an adult man of the collection of finds discovered in Sungir and dating to 26,000 BC was wearing a headpiece strung from 2,936 mammoth pearls, resembling to a crown with cross straps. Next to it, a 2.4 meter-long, straightened mammoth tusk weighing 20 kg and decorated with a sun-disk

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at head-level can be found, which was identified as a royal sceptre by researchers. Archaeologists have established that burials in Sungir took place within sacral ceremonies. The idea of the sacred kingdom is known in the ancient Hungarian legal system, Mesopotamia, China and India. In the Xia Dynasty of the 3rd millennium BC, the king was empowered by the Mandate of Heaven (“t’ien-ming”).

“We can call the religion of the prehistoric Silk Road the religion of the magi, a religion or philosophy of wisdom deriving from the knowledge of the cosmic world order or wisdom-worship in lieu of the 19th-century term of »shamanism«”. THE PREHISTORIC SILK ROAD AND THE EURASIAN TALE CONTINENT Other characteristics of the coherent Eurasian high culture also indicate its existence. Folk tale research earlier found that there had been three distinctly different tale continents in the distribution of Eurasian folk tales. The Eurasian tale continent is the tale region lying along the prehistoric Silk Road, from the Carpathian Basin to Central Asia and more eastward, including Hungarian, Turkish, Chinese, Saka, and Central-Asian folk tales. In the Hungarian tale corpora, István Vámos explores a complete theme, which depicts the cosmic, magical world of existence, and this is almost the same in the historic corpora of Eurasian peoples. The primary region, where the most important element of Hungarian folk tales, the tree that reaches the sky, the World Tree occurs most frequently and has the richest system of symbols, is the region stretching from the Carpathian Basin to India and East Asia. What makes the World Tree a World Tree is that it reaches the sky, that is, the planets, the stars. The Sun and the Moon, however, can be found

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among the branches of the World Tree only in the tale thesaurus of the Hungarian, the Uralic, the Altaic, and ancient Asian peoples. In the world of Hungarian folk tales, it is the cosmo-magical life-force that, as a natural force, “makes the waters of springs flow and the plants of the Earth grow, blows winds into the clouds and assigns the orbits of the Sun, the Moon and the stars”. The Sun, the Moon and the stars are also empowered and given splendour by this magical life-force. This cosmic, magical life-force fills the whole space. The World Tree itself is the embodiment of this cosmic life-force, as it literally a cosmic being, a World Tree, as it is inherent in its very name.

In ancient Central-Asia, from where the people of Arpad moved back to the Carpathian Basin in the 8th century, one of the names of the ancient religion was mazdaism (Mazda = wisdom, mazdaism = wisdom-worship), and another name was the religion of the magi. The word ‘magus’ in ancient times primarily meant ‘wise’. What is knowledge in the modern perspective, was wisdom in the perspective of the ancient Eurasian culture. Wisdom is substantially more than knowledge, because, in addition to knowledge, it also included using knowledge in a right way, in line with the ethical world order. The further meanings of the word ‘magus’ in ancient

The major elements of Hungarian folk tales – the World Tree, the griffin, the dragon and the stag – are major symbols of Scythian art. Griffins appear in five hierarchical roles in the mythology of the peoples of the Steppe. These include the role of God, the ancestor of the nation, the sacred king, the magus, and the sacred king as the magus. The dragon of the Hungarian folk tale type “Son of the White Mare” (Fehérlófia), as its behaviour demonstrates, is different in its every feature from Western European dragons. While in the Western European tale thesaurus the dragon is an evil, beastly monster, in Hungarian tales it has many human characteristics: it lives in a castle together with an earthly woman whom it took, its weapons include a mace and a sword, the hero has a fight with it and defeats it while wrestling, and it is not unusual that it also has some positive characteristics. The World Tree is often guarded by a dragon. It is a dehumanised monster because it has several (6, 9, 12) heads, a huge form and dreadful strength. The Scythian dragon has only one head, just like in Chinese folk tales, in which the dragon is benign. In China, the name of the dragon means: a creature with an excellent wit, which is also the inventor of writing and sciences. With regard to the fact that the old folk tale motives of the tale continent of the Steppe were elements from the ancient religion, there must have been a coherent ancient religion behind the coherent tale continent of the Steppe. THE CULTURE OF THE PREHISTORIC SILK ROAD AND THE EURASIAN ANCIENT RELIGION The religion of the region of the prehistoric Silk Road is named by the terms “animism” or “shamanism”. Both words are newly coined. It would be more correct to use the name of the time instead.

times include proficient in the secrets of Nature, an astronomer, a statesman, a teacher, a healer, a seer having divine knowledge, a priest, a sorcerer, a philosopher. Magi are philosophers as well, since philo = a friend/love of, sophia = wisdom, philo-sophia = a friend/love of wisdom; and wise people obviously love wisdom, and even cultivate it, apply it, adapt it to life. Thus, philosophy did not start with the Greeks; the ancient Eurasian high culture had sacredly worshipped wisdom. The entry ‘Magus’ in Oxford English Dictionary says, “Magi were a pre-Semitic and pre-Arian [i.e. more ancient than Semitic or Arian peoples – AG] priestly caste in West Asia”. As the origins of the Semitic and Arian languages date back to more than 5,000 years, Magi have an even more ancient history. Eurasian Magi were “indubitably Mankind's most ancient teaching nation. The Magi worked without partiality and prejudice". We can call the religion of the prehistoric Silk Road the religion of the Magi, a religion or philosophy of wisdom deriving from the knowledge of the cosmic world order or wisdom-worship in lieu of the 19thcentury term of “shamanism”.” The characteristic features of the Magi, different from the ones of shamans, are well characterised by notes from the Antiquity, according to which Dicinius, the Transylvanian for example, “almost educated the Goths in the entire philosophy and taught them physics, astronomy and logic”, as historian Iordanes noted in 6th century AD. The Magi also had a prominent role among Scythians ruling the Eurasian region in the millennia BC. Around 7th century BC, Scythian seers, magic healers, religious teachers swarmed out from the North to Antique Greeks. The teachers of Plato, Democritus, Pythagoras, Empedocles and Protagoras were all Magi. Magi prepared

“availing themselves of the principles of music, exhibit a most perfect symphony as existing in the universe by the common union and sympathy of the parts for another” Persian princes in Antique Central Asia for kingship, justice, bravery and independency. The Persians can thank the Magi for their political and civil institutions too, historian of religion Gherardo Gnoli noted. “Magi lay down the basic laws of jurisprudence. They state that they are the discoverers of geometry, astronomy and arithmetic”, wrote Diogenes Laertius (200 AD). Magi represented the ethical world order in the legal order of society. Dio Chrysostomus (cca. 40-112 AD) said, “Magi are people worthiest of truth.” On the basis of archaeological and linguistic evidence, Victor H. Mair also proved that the oldChinese word meaning “myag, magus, scholar of science, philosopher” is not of Chinese but Ventral Asian origin. In China, the teachings of the Magi were important primarily in the religious life of the ancient royal court. Chinese Universalism, Confucianism, Taoism were built upon the teachings of the Magi, preserving the cultural continuity dating back to the ancient past. We must add that in the Antiquity, philosophy also encompassed natural sciences. According to Clement of Alexandria, philosophy was regarded to be the most useful activity in the world by the peoples before the ancient Greeks. Actually, the entire ancient culture was based on one single uniform, comprehensive world view, which included religion, the ideas of governing society and even craftsmanship. In his notes, Alexandria Philo writes about Mesopotamian Magi, “The Chaldeans appear beyond all other men to have devoted themselves to the study of astronomy and of genealogies; (…) availing themselves of the principles of music, exhibit a most perfect symphony as existing in the universe by the common union and sympathy of the parts for another, which through

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separated as to place, are not disunited in regard of kindred. These men, then, imagined this world which we behold was the only world of the existing universe, and was either God himself, or else that it contained within itself God, that is, the soul of the universe.” The Hungarian ancient religion is negligently identified with shamanism. However, it is a fact that the priests of the Hungarian ancient religion were called magi and not shamans. The Byzantine and Western missionaries visiting the Hungarians of the Arpad era, cherishing the Hungarian ancient religion, called the priests of the Hungarian religion “Magi”, excellent ethnographer Tekla Dömötör writes in the entry” Hungarian religion” of Encyclopaedia Britannica. The Vienna Chronicle (nowadays more widelyknown as the Illustrated Chronicle,), originating from the 14th century, mentions the Magi by the name “Magos”. Magi played a central role in the ancient history of Hungarians and Central Asian peoples, but also in ancient China and India.

“Most remarkably, three cosmic basic principles constitute the ultimate essence of the Universe in the ancient Eurasian culture.” In his study published in 1990, Victor H. Mair, Professor of the Chinese language and literature at the University of Pennsylvania, demonstrated the difference between shamans and magi on the basis of archaeological finds. According to Mihály Hoppál’s summary, a shaman is the spiritual leader of a clan, a sacrificer, a spirit guide, a seer, a healer (or wise-man), poet and bard (minstrel), and also the protagonist of the drama of shamanisation in one person; perhaps its most characteristic feature is the passage in a modified state of consciousness, in which the shaman takes part in initiation rites and healing. By contrast, in China the ancient magus called ’myag’ (pronounced as mag, the sound 'm' is to be pronounced more softly) belongs to the court of monarchs, holds a state office of high rank, is a counsellor to the king, a seer having divine knowledge, and, as a responsible

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officer, is competent in astronomy, prayers and healing. In other words: the magus is an officer playing a key role in state organisation, a member of the royal council, astronomer, priest, physician, seer, that is, in one word, wise. Mair proved that the Magi had a history of at least 7,000 years. And this is fully in line with the findings of de Groot, “In very ancient times, or even before the dawn of the Chinese religion, the organized religion of the Magi may have had a priesthood in the region of later China.”

Although qi is the most fundamental principle of the Universe, it is not the only one. Most remarkably, three cosmic basic principles constitute the ultimate essence of the Universe in the ancient Eurasian culture. In China, the three treasures, jing, qi and shen, that is, matter, life force and spirit, form one unit. In India, three gunas consist of sattva, rajas, and tamas, that is, matter, life and spirit. Body, soul and mind form one unit both in man and the cosmic world, the Universe.

THE SCIENTIFIC KNOWLEDGE OF THE EURASIAN ANCIENT CULTURE ON 0 THE UNIVERSE AND THE COSMIC ONE-TRINITY

In order to understand the essence of the Eurasian culture, we must have a better knowledge of these cosmic basic principles. The cosmic basic principle

One of the main characteristics of the scientific knowledge of the ancient Eurasian culture is their familiarity with the first principles of the Universe. It is known that the first ancient Greek scholar, Thales was investigating the basic principles (‘archḗ’ in Greek), that is, he was aware of the existence of cosmic basic principles. He did not seem to know, however, what the basic principles of the Universe were. By contrast, it was known in the ancient Eurasian culture from the Carpathian Basin to China that the most profound basic principle of the Universe is the life principle. Considering life as a cosmic basic principle has been preserved by the idea of the Chinese “qi” and Indian “prana”. “All Chinese traditions converge on one essential point: they all hold that the Universe represents an all-comprehensive Urge of Life, an all-pervading Vital Impetus, that never for a single instant ceases to create and procreate and never in a single place ceases to overflow and interpenetrate”, Chinese philosopher, Thomé H. Fang wrote. In Chinese philosophy, “qi” is the ethereal sub-

“Body, soul and mind form one unit both in man and the cosmic world, the Universe.” stance of which everything is composed. According to a tradition preserved in China, the cosmic law is the basis for wisdom. The oldest part of the Shujing (I, 4) reads, “There is the most intimate relationship between the Heavens up and the men down, and who recognises this in its entirety is really sage.”

is an extremely deeply-rooted notion. In its ancient meaning, it is a principle, archḗ in ancient Greek, from which the visible Universe originates, and governs the entire Universe. In ancient Mesopotamia, it is the coherence of the cosmic first principle of One-three, writes Francois Lenormant in his book Chaldean Magic. Basic principle is a more profound notion than the notion of laws of nature, as laws of nature derive from these basic principles – or in other words, first principles. While the number of the laws of nature is rather high, and not exactly known, the number of more profound basic principles, the first principles is known to be three in the ancient world. Three cosmic basic principles, that of matter, life and mind govern the entire Universe, and these three cosmic basic principles form a single unit: the One-trinity. The knowledge of these cosmic basic principles represents the most effective means of science. The basic principles are extremely profound spiritually, probing the human mind, because they are such condensations of reality that encompass the whole world, all the basic laws of nature, and the countlessly endless detectable phenomena in a nutshell. We emphasise that the knowledge of the life principle as a cosmic principle is extremely profound, and means the understanding of the entire modern civilisation beyond the spiritual horizon. “In traditional, ancient societies, it is the life principle that governs the dynamics of individual life”, historian of religion Claude Riviere wrote. The cosmic life principle connects human life with the Cosmos and the ethical world order denoting the respect for life the highest cosmic value. This ancient knowledge about cosmic principles has been justified owing to the four hundred year-development of modern science in the field of the material

The Szekler-Hungarian flag of the One with the double cross in the Pentecost pilgrimage from Șumuleu Ciuc world. The greatest achievement of modern physics is the recognition that all basic principles can be deducted from one single principle – in addition, in the most elegant manner – from the principle of least effect. From this basic principle of the inanimate world, all basic equations of classical physics, relativity theory and quantum physics can be deducted with the help of exact mathematics. It has been proven that the entire material world is in fact governed by this one single cosmic basic principle. The basic principle of physics, however, governs only the inanimate, material world. However important the knowledge of the material basic principle is, physics is the science of lifeless matter, important only for technical-technological development. For our life and our future, a detailed and reliable knowledge of the life principle is even more important, because, if it proves to be correct, we can build our life and our future on the basis of the life principle to be in line with the real essence of our life. We believe that an at least as exact knowledge of the life principle as that of the principle of matter in physics is even more important for mankind and science. Western civilisation is fundamentally focussing on the material development of engineering and technology and on material power. We think that this materialistic view is the most fundamental cause of the ecological crisis threatening the world today. For harmonising civilisation with life and common sense interpenetrating the whole Nature, the scientific development of the life principle expressed in an exact, mathematical form may have crucial importance. In this light, we must mention

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scientific knowledge gets to cosmic basic principles and recognises that those three cosmic principles constitute one single unit, the One, there is nowhere to go to, because this One is the Universe itself, the integrated whole of all beings, thus there are no other beings outside of it. The idea of the ONE also implies the essence of the ancient sacred world order, the One-trinity.

The double cross is in a remarkable substantial relationship with the World Tree in ancient Scythian symbols that it is available owing to the works of Ervin Bauer. The life principle formulated in Ervin Bauer’s exact theoretical biology is identifiable with the life principle known in the ancient Eurasian civilisation due to all its substantial features, its cosmic nature and due to the capability of life, being uplifting and sensible, to create harmony in the entire Universe. This fact indicates that the ancient Eurasian civilisation spiritually surpassed the horizons and the depth of the cognitive skills of modern Western civilisation. THE ONE-TRINITY OF COSMIC BASIC PRINCIPLES IN ANCIENT TIMES Scientific knowledge proceeds from the phenomena perceived by external sensory organs towards ever more profound and comprehensive laws. When

The double cross in the bottom left corner in the 7,000-year-old Tărtăria tablet

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due to its relationship with the One-trinity, we cannot disregard the fact that the symbol of the sound GY in the Hungarian word EGY (ONE) consists of three lines, and not just one in the ancient Hungarian Runic script. This symbol is not only a symbol of the Hungarian Runic script, but also one of the most important symbols of the Hungarian ancient religion, forming a double cross: ╪. This double cross has been one of the most important national symbols from prehistoric times (picture: flag of the ONE). Beyond doubt, there must have been a good reason why we form the symbol of ONE, from which the Hungarian word egyház (‘church’) stems from, with three lines and not one. It seems almost inevitable that the symbol of ONE should constitute of one symbol only. Still, the universal, cosmic ONE is represented by not one but three symbols in the Hungarian Runic script. According to historian of religion Arnold Ipolyi, the One was the forebear, the ancestor of the concept of God in ancient Hungarian mythology. There must have been a good, or even sacred reason why such religious notion of central importance was depicted by three lines and not by one. When “three” means “ONE”, it is about the unity of trinity, the One-trinity. The philosophical system of ancient Hungarian mythology was centred around this cosmic One-trinity. The idea of the World Tree, the Tree of Life and the Tree of Knowledge were all closely related to this idea of One-trinity. It may be related to the fact that the cosmic One-trinity is the unity of the visible world, cosmic life and comic sense. The World Tree is a central motive of the structure of the Scythian cosmos. The fact that the symbols of the World Tree, the Tree of life and the Tree of knowledge closely intertwined in the region of the Eurasian high culture in the millennia BC indicates the idea of the unity of life, the Universe and common sense. Archaeological finds suggest that there was evidence for the symbol of the World Tree in

the Carpathian Basin as early as the 7th millennium BC. Researchers claim that the magical-religious symbol of the double cross depicted on tablets found near Turdaș, Transylvania, originating from 7th millennium BC is connected to the characters of the Mesopotamian civilisation two millennia later. The vertical pole of the double cross is the life principle itself, the trunk of the cosmic Tree, on which the lower horizontal bars is the principle of matter and the upper is the principle of common sense. The life principle is the most fundamental of the three cosmic basic principles, which embraces, holds the world together, and ensures harmony between these three. It seems to be a philosophical system

and sense. In order to overcome the ecological crisis, mankind needs exactly this kind of concept of Nature.

of unsurpassable complexity and unsurpassable elegance.

pretations. According to the mindset of the ancient Eurasian civilisation, some of the false, anachronistic ideas influencing our view include: covering the cosmic, life-centred ancient culture with the word shamanism, and confusing them; disregarding the vast era and high-level of development of the Eurasian ancient culture; disregarding the demographic conditions of ancient times; and the delusion that philosophy and science started with ancient Greeks, leading to a misjudgement of the pre-history of mankind.

“Western civilisation is fundamentally focussing on the material development of engineering and technology and on material power. We think that this materialistic view is the most fundamental cause of the ecological crisis threatening the world today.” We think that the knowledge of the three cosmic basic principles in the Eurasian ancient culture has extraordinary significance because the cosmic One-trinity indicates the existence of a philosophical system exploring the ultimate essence of the Universe. We are talking about such profound knowledge that surpasses the conceptual frameworks of Western civilisation limiting science to the material world even to this day. It is particularly important for us because we can regard Nature as being valuable if we can see it having its own life

CONCEPTUAL HURDLES IN UNDERSTANDING THE EURASIAN ANCIENT CULTURE The essence of the Eurasian ancient culture lies in the cosmic, life-centred view. We see the essence of modern Western civilisation in a material view. Therefore, on the basis of the view blueprinted during long centuries, millennia in the Western world, the ancient Eurasian culture cannot be comprehended in its own context, in its own system of inter-

Shamanism is a term coined in the 19 th century to name the religion of Siberian people. It is a fact that by the 19 th century the religious life and folk traditions of Siberian people had decayed after the Mongolian conquest in the 12 th and 13th century and three centuries of Russian conquest from the 16th century, and undergone an enormous loss of traditions. We should refrain from projecting a folk tradition that has lost its original nature to such a substantial extent back to the age of the ancient Silk Road, i.e. an age 2,000 or even more years ago, under the name shamanism. Western civilisation has demonstrated enormous development in the past millennia, primarily since it revived and further developed the knowledge preserved by the ancient Greeks in the age of the Renaissance. We think that the knowledge of which 19th century-shamanism preserved only certain elements, was the knowledge of the Magi of the ancient Eurasian culture. From this knowledge, Western civilisation has adapted only the branch leading towards material development. A new and even more significant Renaissance can unfold if the other two branches of the ancient Eurasian high

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culture, the branch leading towards the scientific development of life and sense, which have left an indelible imprint on this region, are adopted by the new Eurasian civilisation. A DERAILED WORLD AND THE FUNDAMENTAL QUESTION OF CIVILIZATION For a long time, we had the impression that practically everything being valuable for the modern world had started with the Greeks. But the Greeks themselves, Strabo and Homer admit that troubles started with them. In his masterwork, Strabo (cca. 23 AD), referring to Homer (before 800 BC), writes, “our way of life has encouraged a change for the worse for nearly all people, introducing truphḗ and pleasures and fraudulent dealings and much greed besides. (…) extravagance...retail trade... injustice... corruption of morals... embroidery…” Its almost 3,000-year-old, consistent direction is an indication of the fact that Western civilisation is an ontological stance of the primacy of the material world over life, man, common sense, and the mindset respecting nature, life and sense. According to the book The Sacred and the Profane by Mircea Eliade, Western civilisation is a relatively new way of experiencing the world, in which life and Cosmos are perceived as completely desacralized. Supposedly, time derailed almost 3,000 years ago on this extremely deeplyrooted level, the level of ontology. No matter how many advantages mankind has had from elevating material culture to a very high level, which is mostly contributable to modern natural science, in the long term it is inevitable for mankind to get back on the track of an ecological civilisation, which is harmonious with Nature, communities and common sense and is sustainable in the long term.

THE SIGNIFICANCE OF THE EURASIAN ANCIENT CULTURE FOR BUILDING THE NEW SILK ROAD AND THE ECOLOGICAL CIVILISATION The millennia of the prehistoric Silk Road have tied the peoples of the region together with countless threads economically and culturally. These deeplyrooted traditions may play an important role in the future of the New Silk Road provided today’s viewpoints and circumstances are considered. In the age of One Belt, One Road, OBOR, Hungary can connect the centre of Europe with the emerging East. The New Silk Road provides the peoples of concerned countries with an enormous opportunity for progress. The greatest hurdle in the rapid development of the New Silk Road is represented by the cultural isolation of the peoples in the Eurasian region and their alienation from their common roots. The long-term guarantee of Europe’s rise lies in the “soft elements” of OBOR, in the postmodern culture, legal order and education, all complying with the ecological criteria. It is crucial for OBOR to have foundations that culturally form an integral part of the ancient traditions of these people. It is a fact that the historical memory, traditions, ancient culture of the peoples in this region still preserve common elements connecting the peoples with each other and the more complete dimensions of Nature. Our researches indicate that such-high-level knowledge, or rather wisdom is inherent in the ancient culture of the Silk Road that escaped attention in the centuries ruled by the Western mindset and can come back to the fore with the birth of postmodern science, which is more developed, more comprehensive and more profound than modern science. This more complete postmodern science exploring the

laws of nature of life and sense in addition to the science of the matter, physics, is the key to laying the fundamentals of, re-discovering and re-assessing the ancient culture, the traditional culture of the Silk Road. It is even more timely because the view rooted in the ancient culture fundamentally matches the ecological view – the essence of which is fostering the harmony of communities, man, society and Nature – that would ensure the permanent prosperity of the region. The primacy of ecological viewpoints in the most fundamental mindset of civilisation is not so much a matter of choice any more, but an inescapably necessary step to take, the command of times in more and more parts of the world. An ecological, postmodern civilisation can become more effective than modern civilisation if it creates its own scientific grounds, postmodern science, which is more effective than modern science. The time has come to replace the unilateralism of the scientific worldview by a balanced, ecological scientific worldview, fostering the harmony of man, nations, mankind and Nature. A comprehensive, balanced scientific worldview, as the most modern approach of the 21 st century, can become the main engine of long-term economic, financial, legal and social development. The quality renewal of civilisation requires a comprehensive change of mindset, a healthy concept of nature and society, a healthy vision of man, because these can ensure a balanced, healthy and effective future vision for us in the governance of society as well as in the relationships maintained between nations and within the family. Thus, for example, in the vision of man of postmodern science, man is interpenetrated and connected to Nature and, ultimately, the Universe by cosmic, sacred laws of nature, the laws of nature of matter, life and sense, that is cosmic creative forces. Process philosophy

and constructive postmodernism, associated with the names of Alfred North Whitehead, John B. Cobb és David Ray Griffin, play an important role among the founders and forebears of building the ecological civilisation. The pillars of the Chinese ecological civilisation include ancient Chinese philosophy, constructive postmodernism and organic thinking. The correspondence between the ancient Eurasian high culture and the comprehensive, life-centred postmodern science allows to lay the fundamentals of and further develop both process philosophy and constructive postmodernism, the organic view and ancient Chinese philosophy. The most fundamental, human resources of society lie waste. Surveys demonstrate that half of the people finishing school start their lives as nihilists, adopting a profane view. The most fundamental natural direction of our life is the deployment of our spiritual and intellectual capabilities in order to uplift life, and harmonise our individual and community life with the cosmic creative forces interpenetrating both the inner world of man and Nature as a whole, the cosmic laws of matter, life and common sense. The deployment of human resources provided by Nature is key to the success of building an ecological civilisation in order for man to find its right place in Nature, to recognise its natural place in society and the world, to live their life for the benefit of mankind, and, with their sense, to make decisions serving the long-term progress of mankind. A healthy vision of the world, man and society gives guidance for the advancement of mankind and civilisation on a scientific basis, in harmony with common sense and common good. A comprehensive, holistic worldview based on postmodern science is in fundamental harmony with the high culture preserved to this day by the peoples of the New Silk Road region.

BOOK RECOMMENDATIONS REVIEWS

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BOOK RECOMMENDATIONS

DAWN OF A NEW ORDER: GEOPOLITICS AND THE CLASH OF IDEOLOGIES BY REIN MÜLLERSON The most significant development in global politics following the end of the bi-polar Cold War era has been the rise of a multi-polar state system. The unipolar world order existed only for a short while, as the emergence of major powers and international terrorism have weakened the United States, too, and the competition between Communism and liberal capitalism have been replaced by multi-polar global rivalry. Rein Müllerson, Research Professor at Tallinn University, believes that a balance of power buttressed by international law should be sought in this situation. The author outlines the challenges associated with the new geopolitics of the twenty-first century, which fundamentally affect the developments in international relations. Based on in-depth research over several decades, Müllerson’s book is an essential tool for understanding the new world order and the processes in global politics.

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CHINA ’S ONE BELT ONE ROAD: INITIATIVE, CHALLENGES AND PROSPECTS BY ED B. K. SHARMA, NIVEDITA DAS KUNDU The book is a compilation of studies by Chinese and Indian academics and researchers, examining China’s One Belt One Road initiative with an inter-disciplinary approaches and comparative perspectives. Although the mega- project focusses on connectivity and regional cooperation, till date it has received mixed reactions from the countries concerned, as some are concerned by the strategic implications of its economic significance. Although the authors of the book primarily focused on the economic and cultural aspects of the initiative, they believe that adequate security guarantees and confidence building measures are a key to success. The specific interests of individual countries should be carefully considered, and there is a need to promote active interaction for studying the implications and benefits. Their conclusion is that, considering political and scientific opinions, serious strategic decisions must be made which require the elaboration of details on the Chinese plan and a re-assessment of the China-India relations.

GOODBYE ISLAVE: A MANIFESTO FOR DIGITAL ABOLITION BY JACK LINCHUAN QIU

POWERPLAY: THE ORIGINS OF THE AMERICAN ALLIANCE SYSTEM IN ASIA BY VIKTOR D. CHA

The new world of capitalism propelled by high tech, guarded by enterprising authority, and carried forward by millions of laborers being robbed of their souls. The world is addicted to stet-of-the-art electronic commodities, and their supply is ensured by a generation of iSlaves trapped in a global economic system that relies upon and studiously ignores their oppression. Through the example of Apple and Taiwanese manufacturer Foxconn, the author examines how multinational companies and certain governments collude to build systems of domination, exploitation, and alienation. Jack Linchuan Qiu shows the circumstances in Taiwan with vivid parallels in the Atlantic slave trade, and digital media makes the situation even worse. Therefore, arguing as a digital abolitionist, Qiu, in cooperation with trans-border activist groups, makes a passionate plea aimed at liberating the forgotten “slaves” of the 21st century.

While the American alliance system in Asia has been fundamental to the region's security and prosperity for seventy years, today it encounters challenges from the growth of China-based regional organizations. Victor C. Cha draws from theories about alliances, unipolarity, and regime complexity to examine the evolution of the U.S. alliance system and the reasons for its continued importance in Asia and the world. The author delves into the policies on Taiwan, South Korea, and Japan of the Truman and Eisenhower presidencies and the bilateral security design, which was entirely different from the system created in Europe. Cha argues that this alliance system needs to be renewed to counterbalance China’s increasing prominence and to maximize stability and economic progress amid Asia’s increasingly complex political landscape.

THE INTERNATIONALISTS: HOW A RADICAL PLAN TO OUTLAW WAR REMADE THE WORLD BY OONA A. HATHAWAY, SCOTT J. SHAPIRO The book is a bold and provocative history of the creators of the Briand–Kellogg Pact concluded on 27th August, 1928, who fought to outlaw war. The treaty signed by fifteen leading major powers had been ratified by nearly every state in the world within the year, but there was no chance to implement it, and some years later, the world war was at war again. Contrary to widespread belief, this book argues that our understanding of the Pact is inaccurate, and we are unaware of its real significance. It places the treaty it in the long history of international law, and provides an overview of the struggle for international peace taken up by an array of lawyers, politicians and intellectuals. It also describes the post-war international system where tariffs and sanctions take the place of tanks and gunships, therefore the aspirations for outlawing wars of aggression and creating a stable security environment still have the significance that it has in the age of the internationalists.

IMPROBABLE DESTINIES: FATE, CHANCE, AND THE FUTURE OF EVOLUTION BY JONATHAN B. LOSOS The history of natural science is full of fascinating instances of convergence when certain organisms evolved independently, multiple times, but biologists also point out many examples of contingency, cases where the tiniest change caused evolution to take a completely different course. in his book, Jonathan B. Losos, Professor of Biology at Harvard University, reveals what the latest breakthroughs in evolutionary biology can tell us about one of the greatest ongoing debates in science. He introduces the researchers to whom these revolutionary discoveries owed so much, and illustrates the speed and predictability of evolution with a range of experiments. The real significance of the book lies in changing the way we think about evolution, while giving such insights into natural selection and evolutionary change that have far-reaching applications for protecting ecosystems, securing our food supply, and fighting off harmful viruses and bacteria.

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China's Asian Dream: Empire Building along the New Silk Road

Author: Viktor Eszterhai

As a result of the past decades’ rapid economic growth, China has become a major power, building on which it pursues a foreign policy that suits its new international status. The central part of this is the One Belt One Road, through which – as Tom Miller, Senior Asia Analyst at Gavekal Research puts it – China has begun a kind of empire building. The book deals with the regions that are most important for the Chinese foreign policy, and argues that the realisation of this dream is – although not smoothly – steadily moving forward. CENTRAL STATEMENT OF THE BOOK According to Tom Miller, with the announcement of the One Belt, One Road programme the Chinese foreign policy stepped on a new developmental level: while earlier China showed low activity and more or less conform behaviour to the international rules, with this large-scale initiative it openly sends the message that it has become a major power. The central element of Chinese great power ambitions is what the author calls “Asian Dream” as an analogue to president Xi’s “Chinese Dream” programme, the establishment of a new Asian empire. Empire building is carried out in two ways: with economic tools – through the investments within the framework of the One Belt One Road project – and with military/political pressure. The method of “carrot and stick” is not new in the toolkit of great powers, but the author smartly points out to what contradictions this leads in case of China: while China’s influence is continuously growing in the Asian region, it is incapable of getting friends with its politics, only the leaders of smaller, dictatorial regimes support China at best. All this is problematic because China’s “Asian Dream”, although Chinese rhetoric frequently refers to it, is not necessarily shared by other nations.

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As the author points out, many consider it rather a “nightmare”, and continue to count on the balancing role of the USA. The smaller states of Asia are given a choice by the Chinese foreign policy: they either accept the Chinese concept hoping to take advantage of economic benefits together with the danger of becoming a satellite state for China; or they openly stand up against the Chinese aspirations. In fact, neither path can be clearly taken, so the ambivalent, conflict-ridden intermediate solution strategies will remain for the medium term. In order to be able to present China’s empire building methodology and the smaller states’ possible responses, the author took a several years’ study tour, during which he took interviews with representatives of all layers of society in the countries concerned, so that he could demonstrate the problem as comprehensively as possible. MAIN CHAPTERS OF THE BOOK: PILLARS OF THE “EMPIRE” In the introductory chapter, Miller presents how China lost its position as a regional great power and how the country’s rejuvenation is connected to the restoration of its international status. The author briefly gives account on the regions affected by Chinese influence in Asia: Central, South and Southeast Asia. In the first chapter, he outlines the One Belt One Road initiative as a large-scale geopolitical plan, the goal of which is to lay foundations for China’s Asian empire. The author gives a short overview of the financial institutions that are intended to fund the plan: the Asian Infrastructure Investment Bank, the Silk Road Fund, and the large specialised state-owned banks of China. Miller also points out that from the project’s financing point of view, the most significant ones among the above listed institutions are the big Chinese commercial banks. He highlights that a kind of rivalry has started between the Asian Development Bank, the World Bank and the Chinese institutions in relation to the financing of the new Asian infrastructure. Although the Chinese institutions are not real competitors to traditional international financial institutions, they are expected to play a dynamically expanding role. In the second chapter, the book reviews the reasons of the Central Asian region’s exceptional

significance in the One Belt, One Road initiative. Because of the turbulent historical relationships of China and the region (under the Qing dynasty half of the region became part of China and was named Xinjiang) China has a negative reputation among the local population. But the resources of the region make China a very active investor and an important supporter of local governments. It is especially so if we consider that the traditional great power of the region, Russia, cannot compete with China in economic terms. What’s more, China has further goals with the enhancement of the region’s economic development: Beijing hopes that economic stability reduces support for terrorism and decreases the separatist aspirations of the Uyghurs in Xinjiang. The basis for the common development of Central Asia and Xinjiang will be the exploitation of local resources (oil, gas and ores) and long distance transport, which would make the region the main axis of Eurasia. The locals and the Han immigrants gave different answers to the questions about the rationale of the large-scale plans, which reveals the uncertain assessment and outcome of the plans.

“…with the launch of the One Belt, One Road programme Chinese foreign policy stepped on a new developmental level (…) with this largescale initiative it openly sends the message that it has become a major power.” The third chapter of the book explores the similarly complex relationship of the Mekong region and China through the examples of two countries traditionally under Chinese influence: Laos and Cambodia. In both countries, Chinese investments into mining, infrastructure (e.g. the KunmingBangkok railway), trade and tourism meant a way out of poverty and gave opportunity to join the

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world economy through China. All this came at a very high price: environmental damages, land expropriation and excessive political dependence that caused worries not so much in the corrupt elite but mainly in the local population. Whether China can maintain its influence depends largely on the capabilities of its companies to better understand local needs. The fourth chapter discusses the deterioration of the relationship between China and its once most important ally, Myanmar. For decades, the only serious supporter of the Myanmar government was China, and as a result, the East Asian country extended its economic influence over its neighbour. Innumerable Chinese-owned mines were opened (Letpadaung), huge energetic (Myitsone Dam) and infrastructural investments (e.g. oil pipeline between Kyaukphyu and Kunming, which is a shorter transport route into China, replacing the Strait of Malacca) were launched. The evictions from construction sites and environmental concerns led to anti-China protests, and as a result, the Myitsone Dam (from where 90 per cent of the electricity produced was planned to be exported to China) construction was halted in 2011, four years after its start. Anti-China resentment is not without historical background, but after 2011 it seemed that Chinese-Myanmar relations froze for a long time, what is more, Myanmar started approximating the USA, which showed openness after the announcement of the “Asian Turn” policy. The international public opinion expected the government that came to power in 2015 and is led by Aung San Suu Kyi to further distance from China, but surprisingly, this government is getting closer to Beijing. This reveals the fact that no neighbouring country can stay away from the economic opportunities China offers. In the fifth chapter, we get an overview of the relationship between China and South Asia through the relations of hostile India, the quasi-ally Pakistan and ambivalent Sri Lanka. In India, One Belt, One Road is seen as a two-edged sword: on the one hand, it in fact improves economic relationships in the Asian region. On the other hand, it increases the political and military influence of Beijing in the region, because China gains control over ports that enable it to surround the Asian rival, India (“String of Pearls” strategy) and ensure Chinese control over maritime trade routes. For Pakistan, One Belt,

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“China’s isolation – similar to the cold war – is rather an illusion now; the world, and first of all the former hegemonic power, the USA, has to learn to live together with the new great power.” One Road means huge (worth almost 60 billion USD) investments, which is an indispensable source for the modernisation of the country. Although the China-Pakistan Economic Corridor would mean significant geopolitical advantage for China, because the routes to the European and African markets would become shorter and it would mean more secure access to energy carriers in the Middle East, as terrorism in Pakistan seriously threatens Chinese investments. The government of Sri Lanka built close relations with China from the 2000s, and as a result, Chinese companies started numerous largescale infrastructural projects (road, motorway and airport constructions, Colombo Port City). But the government had no collateral to repay the loans, which led to resistance in the local population and eventually to the fall of the government. After the new government’s coming to power in 2015, relations began to improve, because the Chinese government showed willingness to develop Sri Lanka’s situation, in particular through reducing loan interests. This was an important lesson for the Chinese government: it can make friends only by considering mutual benefits and not by engaging corrupt leaders. The Myanmar situation is also a good reminder for the other, smaller states: it is difficult to refuse the economic opportunities offered by China.

realpolitik behind the “salami tactic”, so it’s not likely that China’s behaviour would be changed by the decision of the international court or the opinion of any other international organisation. Vietnam is at the forefront of this policy: although Vietnam does everything to counterbalance China’s pressure (seeks support from the USA and Russia), it still cannot cut off relationships with its giant neighbour. CONCLUSION In his conclusion, Tom Miller establishes that China has become a great power, and this is a fact that can no longer be left out of consideration in international politics. China’s isolation – similar to the cold war – is rather an illusion now; the world, and first of all the former hegemonic power, the USA, has to learn to live together with China, a great power. This is especially true for China’s smaller neighbours that have significant roles in China’s empire building aspirations. However, the learnings of the past decade reveal that China’s dream can come true only if it is capable of paying more attention to the local communities’ needs and interests through its companies.

EVALUATION OF THE BOOK The major virtue of the book is that – as opposed to the other English language literature on the subject – its author consciously pursues an objective approach. He does not demonise China’s role, but has no illusions either: China is a great power that, due to its growing international significance, increasingly influences its surroundings. Tom Miller’s book provides a huge amount of data and information, at the beginning of each chapter maps help orientate, which means invaluable help for readers interested in Asia. The book however, fails to prove the question raised, since that would have required a systematic analysis. Although the interviewing methodology chosen by the author is suitable for presenting the different possible approaches to the question, in several cases the choice of the person to be interviewed seems to be rather random. This is why the book’s reasoning is though intriguing, hardly convinces the reader about the correctness of the author’s conclusions, thus it is not adequate from a scientific point of view.

In the sixth chapter the author gives an account of how China’s behaviour in relation to the South China Sea changed during the past years. While earlier China displayed dilatory and reserved behaviour, by now it has become increasingly active, and the reason behind this is obviously the intention to gain control over the strategically significant region. There is

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RESTLESS CONTINENT: WEALTH, RIVALRY AND ASIA’S NEW GEOPOLITICS BY MICHAEL WESLEY

Author: Péter Klemensits

Michael Wesley’s book provides one of the best accounts of our days on the most important trends that define the development of the Asian continent. In the Australian professor’s opinion, there Is a serious struggle going on for the primacy of the Asian continent, the outcomes of which will be determined by the continent’s internal dynamics. These are in the focus of his book explored from the aspects of politics, geostrategy, economy, trade, geography and culture.

ABOUT THE AUTHOR Michael Wesley is one of the world’s leading experts on Asian and international affairs, he is a former head of the Lowy Institute for International Policy, and currently Director of the Coral Bell School of Asia Pacific Affairs (ANU) and Professor at the Australian National University. His articles regularly appear in the New York Times, the Wall Street Journal, the Financial Times and the Economist. His previous book, There Goes the Neighbourhood: Australia and the Rise of Asia, won the 2011 John Button Prize. BASIC ASSUMPTIONS OF THE BOOK The central topic of Wesley’s current book is the struggle for the Asian continent’s dominance from the perspective of past, present and future. In his opinion, the future of this process will be determined not only by the behaviour of the United States but also by the internal dynamics of Asia, so he endeavours to analyse primarily these aspects in detail. The author discusses geopolitical

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correlations, makes conclusions and outlines possible future scenarios from the aspects of economy, trade, geography, military policy and culture, although refrains from making specific forecasts.

on Earth. The data speak for themselves: earlier Great Britain needed 50 years to double the per capita income, the USA needed minimum 30, while Japan, South Korea, China, Singapore and India achieved this within 10 years. The decrease of poverty is also a world record, because in NorthEast Asia the proportion of the poor changed from 57.7 per cent in 1975 to 21.2 per cent in 20 years. The author names three closely related conditions as reasons for this unprecedented economic development. 1. None of the countries was strong enough to establish dominance in Asia while wars generated too high costs, so peaceful cooperation became much more profitable. 2. The foundation of ASEAN also embodied the increasingly popular idea that establishing economic development and stability overrides everything in significance, so disagreements have to be set aside and disputes should be resolved in a peaceful manner. 3. Several multilateral economic and security institutions were established that mutually strengthened each other, facilitated the expansion of economic relationships with America and the utilisation of the advantages of American military defense. As far as the future is concerned, however, the author is not optimistic; he believes that these circumstances have considerably changed by now – primarily due to the rise of China – therefore the peaceful and uninterrupted economic development of Asia in the future is questionable. CONSEQUENCES OF INTERDEPENDENCE

“PEACE DIVIDENDS” The first chapter overviews the major events of Asia’s history from the 1970s, highlighting among others the transformation of American foreign policy after the Vietnam defeat, the end of universalism and the victory of pragmatism, that is, the significance of the possibility of establishing alliance with China. After the wars in the region stretching from the Middle East to the Pacific Ocean earlier, the 1970s brought stability, because the strategic ambitions were not achieved, but with the advancement of pragmatism, the possibility of dynamic economic development opened up in the era of peace. The performance of the Asian countries surpassed all expectations, and within a short time East and South-East Asia became the most dynamically developing regions

The second chapter dwells on the significance of interdependence between Asian economies, and the consequences of interconnectedness of trade relations and strategic transport routes. European colonisation fundamentally transformed Asia’s economies and also laid the foundations for the disunity of the continent. After 1945 the ideological disagreements perpetuated dissention, the borders drawn by colonisers meant a difficult heritage for the countries gaining independence. By the end of the 20th century the advance of regionalism created conditions for integration with respect to sovereignty. Japan’s attempt failed during the World War II, but after 1945 the cooperation on war reparations served mutual development. Through international investments an increasing number of countries benefited from this process, and in the

meantime Asia got to the forefront of the world concerning production sharing. Today more and more countries and companies participate in the production of a certain product, which restructures global economy and promotes the spread of technological developments and facilitates the growth of smaller market operators. As a result of industrialisation, the demand for raw materials in certain regions has increased, which helped build closer relationships with countries with raw material deposits. The strongest economies (China, India, Japan) need to import raw materials, the necessary oil and gas supply is easiest to obtain from West Asia, and smooth communication is of strategic importance. In order to ensure this, several regional initiatives were born that focus mainly on infrastructural developments, and strengthen integration further. Undoubtedly, One Belt, One Road is the most significant among the projects. Since it involves enormous investments, and – although all participants benefit from it – there is a fierce competition among major powers to grab the biggest advantages. LIMITATIONS CAUSED BY INTERDEPENDENCE In the following chapter the author presents the problems and possible negative consequences of the economic interdependence of Asian countries.

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Since globalisation arrived to the Asian countries through colonial empires, after gaining independence the governments supported closed economies in which the state played a significant role. But from the 1970s on, opening up was inevitable, the role of the private sector became more significant and state control moved to the background. As a result of eliminating trade barriers and ensuring the free flow of capital, the Asian countries became an integral part of the global economy by the turn of the millennium. Urbanisation poses a growing challenge for Asian governments causing substantial problems mainly in developing countries. Another worrying phenomenon – that can be observed in the case of China as well – is the structural transformation of the economy, which results in the advancement of the manufacturing and the service sector along with the decline of agriculture in the given country. As a result, the self-sustainability of the economy concerned decreases, the dependence of industrial centres becomes permanent. Urbanisation entails social transformation, which might mean danger for the governing elite in a political sense, because if the leadership is incapable of ensuring expected growth, further reforms (open-up) will be necessary. This may lead to the further erosion of state influence over the economy, while returning to self-sustainability is no longer possible. In order to obtain markets, raw materials, investments and energy, the Asian countries are dependent on the global economy, but on the basis of their rapid and large-scale development they demand a larger share. So, the larger countries are characterised by a kind of strategic claustrophobia, which is a fear of their development getting stuck, because one of their neighbours takes the necessary assets. In order to balance this, the Asian countries strive to reform regional and global institutions, and try to modify the rules established by the West according to their interests. COMPETITION OF “RESTLESS SOULS” The fourth chapter introduces the increased sensitivity of Asian countries toward civilisational hierarchy. In Asian societies hierarchy plays a very

important role, it even determines the international relationships of certain countries. China’s supremacy in the region was unquestionable for centuries, but due to European dominance even its neighbours ceased to believe in this by the beginning of the 20th century. The USA and the Europeans considered the population of the colonies inferior, only after World War II did the newly independent countries gain equal status in the international hierarchy. Since the state borders were drawn by the colonists, these countries were characterised by serious ethnic and religious conflicts, so the state did everything to justify its existence. Cultural pride – that dates back to precolonisation times – proved to be a productive focus point for several Asian societies in the process of establishing a unified national identity, but at the same time it sowed the seeds of rivalry as well. The Asian societies’ opinion about the external world is still determined by its assumed role in the cultural hierarchy, their understanding of history is affected by numerous stereotypes. Since we are talking mainly about multicultural societies, ethnic heterogeneity also feeds conflicts, the likelihood of which is further increased by nationalism that is nurtured by historical heritage, colonial past, territorial disputes and different levels of economic development. The author believes that there is a deep cultural rivalry among emerging Asian powers, and consequently trust and the willingness to compromise are gradually disappearing, and Asia’s countries will remain “restless souls”. GEOGRAPHIC CONSTRAINTS The fifth chapter presents the geographic parameters of the Asian continent, the spatial environment in which the struggle for primacy is taking place. According to Wesley, geography is the same for states as DNA for humans: an unmistakable heritage that determines, shapes and limits our possibilities. In the current global era borders and territorial sovereignty gradually lose significance; as opposed to this, in Asia a new period of territorial disputes has set in and a new security dilemma has arisen: certain countries, in fear of becoming surrounded, build alliances and

strengthen defense against their neighbours, who react similarly, because they also fear the same. To understand the security dynamics, we have to explore Asia’s strategic geography as well. Mountain ranges divide the continent into a northern and a southern belt. The southern part extends from the Persian Gulf to the Korean Peninsula and includes the coastline of South and Southeast Asia. 80 per cent of Asia’s cities are situated in this area and the majority of the industrial and military power is concentrated here. The ocean carries 90 per cent of the world’s trade and can be regarded as the main resource of prosperity. At the same time, it means a source of threat that influenced the shaping of the defense strategy. Beside the traditional development of the navy, nowadays the establishment of asymmetric capabilities has gained increased importance. Parallelly, an arms race has begun involving India, China, Japan and the Southeast Asian states. However, the security paradox can be observed here as well: the stronger a state is, the more vulnerable it feels, while the bigger power it has, the less it is willing to tolerate the obstacles in its way. In a strategic sense the straits, peninsulas and gulfs have exceptional importance, suffice to think about the Bay of Bengal, the strait of Malacca and the South China Sea. This is expressed in several ways in the security strategies of India and China.

processes and trends. First he raises the questions why Asia is the most rapidly growing region and why this area will shape world history in the future. In his answers, Wesley identifies four synergistic reasons that differentiate Asia from the other parts of the world: scale, muscle memory (the ideal of the strong state), pride and location. He thinks that taking social and moral transformation, economic interdependence, and the rivalry among the states into consideration, Asia’s future will not be peaceful, but neither will it fall victim to constant wars. Instead, future international relationships can be formulated as “rivaling interdependence”, because the emerging countries aspire to gain bigger influence, so they consider one another rivals, but at the same time larger wars are less likely because of their interdependence. Since Asian countries are reshaping the current world order, it is possible that this order will be to a certain extent “incoherent”, because Asia’s major powers will build their own spheres of influence beside the USA and Europe. Nevertheless, this would entail serious consequences for the global economy, thus, as Wesley concludes, the other alternative, the intensification of globalisation and the enhancement of integration seems to be a more likely scenario. CLOSING THOUGHTS

The largest plain on planet Earth can be found in the northern belt. It is bounded by mountain ranges in the south and the Arctic in the north. When the nomad threats were over, Russia and China rose to the status of the strongest powers of the region and it is primarily their rivalry that determines the region’s future. The vast space and the low population density offer opportunities and may present dangers alike. The question is whether Beijing is going to pursue its land or maritime ambitions in the future. ASIA AND THE NEW WORLD In the last, sixth chapter the author presents the relationships between Asia and the rest of the world and makes conclusions about the major

The book “Restless Continent” is basically founded on secondary sources, but one of its major virtues is that it excellently organises the information available in press and gives an outstanding and worthy summary on the geopolitical struggles of the Asian continent. Being an Australian, the author gives unbiased evaluation on the policies of American and Asian countries, which also contributes to the book ’s value among the Western specialised literature on the subject. In general, Michael Wesley’s book is for everyone who is interested in geopolitics and Asia. Its clear and straightforward wording, the narrative enriched with historical examples make it recommended literature for university students as well.

CRACKING THE CHINA CONUNDRUM BY YUKON HUANG

Why Conventional Economic Wisdom Is Wrong Author: Ferenc Bánhidi

Discussions about the economy of China feature prominently in both the media and scientific circles these days. But the strong interest has not resulted in convergence of different positions, in the past few years a polarisation of views can be observed. While pessimists perceive that the slowdown of growth and soaring debt levels signal an inevitable financial crisis, optimists interpret the ineffective operations of markets as opportunities for new developments within a framework of comprehensive reforms. Yukon Huang, a renowned economist and China expert, indicates with the title of his new book that he does not consider himself standing in the middle in the above debate. He sees that the source of popular but faulty views on the near collapse of the Chinese economy is that experts use inappropriate framework for analysis. They try to evaluate a huge country with a large diversity of levels of development along a general system of criteria. They fail to notice that although basic principles of economic transformation (marketisation, property diversification, opening to the external economic sector) are identical with the successfully modernising countries, the process of transformation differs, so the mechanical application of the experiences of those countries lead to wrong conclusions. The author highlights three, widely accepted views on the Chinese economy that are based on such wrong premises. The first is about the shortly expectable debt crisis. The debt level of the economic operators itself may give cause to worry, but this can be regarded as public-law debt, for the management of which the state has appropriate resources at its disposal

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ABOUT THE AUTHOR Yukon Huang is an American economist of Chinese origin. He worked at the World Bank for years and at the end of the 90s he was the World Bank’s first country director for China. He currently is a senior associate and a China expert at the Carnegie Endowment. In the past few years he has published dozens of articles in the Wall Street Journal and the Financial Times. As an acknowledged expert on the subject, his opinion about almost all current issues of Chinese politics and economy has been asked for. Huang wrote this book with the intention of summarising and systematising his explanations provided in the past five-six years about various subtopics.

(foreign-exchange reserves, national landholding). In respect of the decades-old, distorted pattern of growth of the Chinese economy, although share of consumption to gross domestic product is

exceptionally low in international terms, in China this does not require restructuring of the growth model, because it is based on the ongoing urbanisation and the traditionally high savings rate. And finally, maybe the most widely accepted view reckons the Chinese state capitalist system a distorted form that suffocates the market and thus competition. According to the author, although the state in China has a larger than usual role in taking economic decisions, this system stimulates competition, because the local governments behind the companies are interested in it, and it is also supported by the political system.

The evaluations in the Asian countries also differ from each other, but favourable opinions are predominant as a whole. The situation is controversial in case of the ASEAN countries, because their most significant trading partner is China, but they are already worried that they won’t be able to compete with China in the markets of developed countries.

Yukon Huang is not uncritical with the Chinese political-economic system. He gives detailed analyses of the controversial situation of the 250 million rural workers in cities, and the so far sluggish execution of the 2013 decision on economic reforms. He also notes that the increasingly ambitious Chinese foreign policy does not correspond to the institutional bases of the political decisionmaking system, so the risk of exceeding itself is inherent. Yukon Huang’s book is primarily for those readers who believe or at least accept that a China of growing influence must be taken into account both in global politics and in the world economy, and who are curious about the challenges that this country, which is so difficult to decipher, has to face in the following ten-fifteen years.

no intentions earlier to engage in global decisions, nowadays this is changing; however, due to differences in values it is difficult to find basic principles for China’s global involvement that are generally acceptable.

EVALUATION OF CHINA IN GLOBAL AND REGIONAL PERSPECTIVES In the past three-four years, the unfavourable opinion became dominant in the USA and Europe. Studying the trends revealed by public opinion polls, the big difference between the averagely favourable opinion in the period of the global financial crisis and the overall unfavourable opinion in the period of the recovery since 2012 is striking. In Europe, the impact of the great power rivalry with China is much more moderate, so negative opinions are clearly less here. But within this it is interesting that 60 per cent of negative opinions come from Germany, the country that has the most intensive economic relations with China. The United Kingdom is on the other end, where the ratio of unfavourable opinions hardly reaches 35 per cent, although bilateral commerce is not significant.

In Yukon Huang’s opinion, the overall unfavourable results of public opinion polls strengthen the conviction of European decision makers that authoritarian systems cannot be considered credible partners in international politics. China had

ON THE FOUNDATIONS OF CHINA’S GROWTH MODEL In Yukon Huang’s opinion, the two definitive figures of the Chinese reform and opening-up policy are “political entrepreneurs” Deng Xiaoping and Zhu Rongji. Both of them had a comprehensive vision of the country’s transformation and they were willing to take risks to realise it, they were not afraid of radical break-up with traditional interest groups. Deng Xiaoping implemented three reforms at the beginning of the 80s that gave a key role to nonstate economic operators to trigger economic growth. With the agricultural reform he brought back individual farming and market-based operations into agriculture. The industrial and commercial plants of former village and small town communes were given to private entrepreneurs as contractual partners for operation by keeping the property in local government ownership. Foreign investors were attracted into special economic zones by offering particularly advantageous terms, which laid the foundations for the export successes of the following years. Deng Xiaoping’s strategy in the 80s openly accepted that the differences between regions would increase. The traditionally more developed coastal territories could offer considerable

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The investment stimulating effect of urbanisation and industrialisation is a natural process that all newly industrialised countries went through, the author says. If the Chinese government listened to criticism and tried to artificially increase the consumption rate, it would jeopardise further growth. Yukon Huang presents international examples to prove that among the developing countries that went through the industrialisation process, those East Asian countries were successful that had a relatively high investment rate. The Latin American countries where the investment rate remained lower, remained stuck at a medium level development after a quick phase of convergence. CHINA’S DEBT DILEMMA

benefits for investors from Hong Kong and Taiwan. At the same time, he lifted domestic market barriers, so workforce and capital was able to freely move from the less developed western areas to the regions opened for foreign capital. Ultimately, he was the one who introduced the system based on growth competition, which was also supported by the factor that GDP growth of the region became a main criterion in the evaluation and later promotion of political leaders. Zhu Rongji made three politically risky decisions at the end of the 90s. In order to join the WTO, he agreed to radically decrease customs duties; he initiated large-scale company restructuring to increase the industry’s competitiveness; and he terminated the state housing system overnight. All three measures played a significant role in the two-digit economic growth rate after the turn of the millennium. However, these steps required serious sacrifices. The number of workers laid off from factories reached 40 million. CHINA’S UNBALANCED ECONOMIC GROWTH Yukon Huang has effective arguments against the widespread criticism about Chinese economic policy that the state tries to support economic

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growth with forced, not market-driven tools, thus endangers long-term sustainable development. As critiques put it, interest rates artificially kept low to stimulate investments, and consciously devalued foreign currency exchange rate to encourage export are exactly such tools. The impact of these two factors appear in the extraordinarily low share of consumption to gross domestic product, which will create barriers in demand against growth in the future. According to the author, the flow of village workforce to the cities and transfer of labour from agriculture to industry leads to an increase of share of profit to gross domestic product, and this also drives the growth of investments. In agriculture, labour incomes are several multiples in production value of those in industry, so if employees transfer between the two sectors, it means considerable growth of profit ratio in the economy as a whole. The urbanisation rate in China is currently 56 per cent, which is a significant growth compared to the 20 per cent of the 80s. But in comparison with the rate of similarly developed countries, it does not count as high, so further growth can be expected in the following 5-8 years.

The unsustainably high level of Chinese debt has given topic for discussion for the media on a daily basis since 2012, and it has been the most often cited argument together with the slowing economic growth to support the view that the Chinese economy moves toward an inevitable financial crisis. Yukon Huang categorically refutes this evaluation. In his opinion, the basic structure of Chinese economy is healthy: the international balance of payment has a surplus, budget deficit is moderate, savings of households are stable and significant in size. One has to be strongly biased to regard an economy of such parameters to be on the brink of a crisis. The author admits that the 160 per cent corporate debt to GDP ratio can be considered high, and it is especially alarming that this ratio has doubled since 2008. Before the international crisis, corporate debt levels were appropriate for the basic conditions of Chinese economy, 80 per cent in an underdeveloped share and bond market cannot be rated high. The cause of the current problems lies in the package of measures that was taken by the government to manage the international financial crisis. The programme accepted in November 2008 pumped a huge amount, US$586 billion into the economy, a substantial part of which was financed by loans from state-owned banks. Many of the beneficiaries were state-owned companies, which paid more attention to achieve the goals set by the state than to produce returns on investments. Since 2012, the government has been paying extra attention to debt management, but so far has managed only to moderate growth,

and failed to achieve a substantive breakthrough: to eliminate bad debt. In Huang’s opinion, the tools to solve the problem are available, there is only lack of determination to assume conflicts of interests. The most important step could be the acceleration of the state-owned companies’ reforms. The substantial part of bad debt has accumulated at these companies, and they are the ones that still drain a significant part of investment resources from the effectively operating private companies. A successful consolidation programme was carried out in the 90s to manage the bad debt of state companies, in which a part of foreign exchange reserves was used to recapitalise the banks. In order to stabilise the financial system, the correction of the real estate market should be required, which could be achieved by making settling for rural workers easier in cities. Also, limiting the infrastructural investments in the Western part of the country would release resources for more useful purposes. ABOUT THE ECONOMIC, SOCIAL AND POLITICAL TENSIONS TAKING SHAPE The author acknowledges that the economically successful growth process in China caused social tensions and environmental degradation, which are less and less sustainable under current circumstances. The scale of income inequalities is clearly demonstrated by the fact that in 2016 the per capita income in cities was triple the rural incomes, and the average income in the developed coastal regions was double the average income in the least developed western territories. As Huang puts it, this was the inevitable consequence of Deng Xiaoping’s strategy that was based on competition between regions. Since it occurred between and not within regions, social acceptance could be managed. Still, the political leadership sensed that changes were necessary. Huang cites statistics that show that the growth of the above-mentioned inequality indices stopped in 2003 at first, then from 2009 on the per capita income in both the rural and western underdeveloped areas grew faster than in urban and coastal regions. The book focuses exactly on the management of economic problems, but in this part the author also dwells on the possibilities of political

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liberalisation. He emphasises beforehand, that even if we accept Acemoglu and Robinson’s wellknown development theory, China cannot be considered a conventional authoritarian state. According to Acemoglu et al, in dictatorships the dominant social group appropriates the major part of resources through exploitative institutions. As a result of the political and economic reforms implemented by Deng, a regionally decentralised competition system was created that partly encouraged growth, partly acknowledged and embraced local interests as well. The stability of the Chinese political relations is partly due to this peculiar system. Western political analyses on China have noted recently that the country has already reached the level of economic development that commenced the political reforms that led to full democratisation in Korea and Taiwan in the 80s. Huang accepts the view that the impacts should appear in politics as well, since China follows Western trends in the economic sector. He does not deny the necessity of liberalising political reforms; he only argues that economic conditions for this are lacking yet. In Korea and Taiwan in the 80s it was not only the income that reached a higher level, but there also emerged a significant urban middle class, working mainly in the service sector. In China, both the urbanisation rate and the development of the service sector substantially lags behind the countries taken as models. In accordance with Huang’s assessment, China will reach the development level which enables western type political reforms to be addressed only sometime between 2025 and 2030. CHINA’S FOREIGN TRADE AND WORKING CAPITAL RELATIONS Huang gives a detailed account on China’s international relationships, and within this specifically deals with some widely accepted views that are based on one-sided evaluation of the facts. One such assumption is that Chinese successes in export are mainly based on western working capital investments. In fact, although the capital import of

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a total of 308 billion USD in the two decades before 2000 was truly high, 80 per cent of it came from Asia, the share of the USA and the EU was merely 16 per cent. It was more convenient for large multinational companies to transfer the management of production processes to Asian partners (Hong Kong- and Taiwan-based companies) and concentrate only on product design and distribution. In the decade following the turn of the millennium, China became the centre of a large Asian production value chain, in which Japan, Korea and Taiwan transported key parts requiring high technological levels, ASEAN countries transported partly raw materials, partly lower value subassemblies to Chinese assembly plants. This division of labour worked so successfully, that – as a result of the fast development – China became the most important foreign trade partner for the ASEAN countries after the turn of the millennium. Today there are widely accepted statements in the USA, like “China’s aggressive trade policy is to be blamed for a major part of the American foreign trade deficit”, or “China’s huge export surplus was achieved by a currency policy that consciously counted on devaluation”. Huang thinks that given the above regional network, both statements are easy to refute. The American trade deficit started to grow in 1999 and it peaked in 2005. Trade with China in this period was not yet significant, the largest export surpluses were realised by developed East Asian countries (South Korea, Japan, Taiwan). But in the period between 2005 and 2008, a serious change occurred. China drove these countries out, but the American deficit hardly changed. It is clear from the above analysis that China’s gaining ground does not stem from its trade policy, or currency manipulations; it is due to value chain transformations where China became the final assembly point. Huang has noteworthy and at the same time peculiar views on the chances of the Chinese national currency (RMB) becoming international. China is known to have made much effort in the past 4-5 years to accelerate the process, but Huang considers this an activity that aims to enhance national

reputation but lacks real economic foundations. In Huang’s opinion, there were two factors that played a major part in the American dollar’s becoming a key currency: in the beginning, the open and developed American capital markets and the generous international aid policy (the Marshal Plan), but especially in the past 20 years the fact that the USA resolutely took on the trade deficit and the foreign debt to finance it. According to Huang these conditions are not present in China. They are not ready to afford a negative balance because of employment and other reasons, and the development level of

GDP/capita level and has 5 more years to achieve the above threshold. In respect of China’s political power, impact on international processes, and its possible role in global governance, the author is far more pessimistic. In his opinion, China has no sufficient experience in handling sensitive international issues. As the results of the international public opinion surveys prove, the efforts of the past years have not been effective either in increasing the country’s soft power or in developing bilateral partnerships. It has to be assessed against this background that Xi Jinping broke with the passive

the country does not justify a generous aid policy either. But if there is no appropriate RMB liquidity available in the international markets, becoming a world currency remains a distant goal.

foreign policy introduced by Deng Xiaoping, and attempts to promote China’s national interests much more expressly than before. ASSESSMENT OF THE BOOK

CONCLUSIONS – CRACKING THE CHINA CONUNDRUM In the closing section, the author returns to the debate between the analysts dealing with China, the optimists and the pessimists, and outlines his forecasts for the next few years. On the basis of what has been said in the previous chapters, he considers himself an optimist; he considers the most important macro-economic issue, to limit excessive credit with a financial system reform, is manageable. As far as the economic growth rate of the following ten years is concerned, he describes forecasts of three groups of opinions. The optimists, headed by the government’s semi-official advisor Justin Lin, do not calculate with deceleration, they think the 7 per cent growth rate of the previous years can be maintained. Huang is more cautious; he thinks a 5-7 per cent growth is likely in the following 5-10 years. He supports this view with two reasons. The first is that he counts on the effect of the planned but not yet implemented economic reforms, especially the reforms of state-owned companies, which would encourage efficiency and thus generate growth. The second is a somewhat technical reason: the East Asian countries that successfully managed to converge to the US$20,000 GDP/capita level also could maintain the above average 5-7 per cent growth rate. China is currently at US$13,000

A great number of articles on the Chinese economy appears in different media that put forward often superficial and overly biased opinions. Yukon Huang with his decades-long practical experiences at international financial institutions and comprehensive theoretical knowledge aspires to go deeper than daily press and explore the connections between subtopics, and to give solid support to his views by considerable statistical data and thorough understanding of specialised literature. In case of the majority of the topics covered, he succeeds in this. However, he puts the reader into a difficult situation. We often have the feeling that maybe too many questions are asked in his analyses and due to size constraints, he cannot elaborate all his views on them. We missed the thorough explanation of the concept of “regionally decentralised competition systems” most, to which he attributes several positive effects, but fails to prove them. The debate between the groups with optimistic and pessimistic views about China has been going on for years; in daily press and theoretical writing the pessimists are dominant, while in the analyses of international organisations and papers of prestigious consultancy firms the optimists are in majority. Yukon Huang’s book is a useful guide in following this intriguing debate.

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for the right time. But the author thinks this era ended with the coming to power of Chinese President Xi Jinping. The chapter deals with the segments of the President’s “Chinese dream” foreign policy announced in 2012, which envisages a growingly confident China acting as a global power. At the same time, the author remembers to mention the internal problems of China, like corruption and the slowdown of economic growth. which endanger the legitimacy of the Chinese Communist Party, and mentions the “colour” revolutions in several countries, which also can pose possible dangers for the Chinese leaders.

Author: Alexandra Zoltai

The author, Gideon Rachman, is the chief foreign affairs columnist of the Financial Times. This book was published in 2016, the title is simply and eloquently “Easternisation”, by which the author means that the global power centre is shifting from the West to the East. The starting point of this change was the global economic crisis, which meant a decline for the West and a strengthening for the East. Rachman considers that the strongest power is China, which may become the new global power centre, and he explores the fact of the West-East shift accordingly, from the point of view of America, Latin-America, Europe, Russia, Africa, the Middle East, East Asia, Southeast Asia and Australia, too. Rachman highlights correlations and significant facts regarding regions and countries that support the presumption of “Easternisation”.

INTRODUCTION The author starts the book with a short historical overview, in which he examines the past years from the point of view of China. He moves from western imperialism up to 2014, when the IMF announced that, measured in terms of purchasing power, China was the world’s largest economy. Then he deals with those causes and conflicts that in his opinion resulted in the weakening of the Western world. Finally, Rachman explains the notion of “divided East” from the aspect of emerging powers and Western allies. The book is organised in two parts. In the first part, we can read about the Asian situation in relation with “Easternisation”; in the second part, he explores the phenomenon, process and impacts of the shift to the East. FROM WEST TO EAST Rachman reckons that one of the reasons of the end of Western-centredness lies in the quickly developing Asian cities like Shanghai and

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Singapore. He also supports his views with the cycles that can be observed in Chinese history, when dynasties rose and declined. The author compares it to American history that shows much more linearity. He puts the beginning of the West’s domination to the end of the 1400s, when the period of European colonisation started, the process of which is discussed through several pages stressing that Japan was the only colonist in Asia. According to Rachman, the processes after the world wars laid the foundations for shifting the balance of power to Asia, and he emphasises two significant aspects. The first is that America became a global power and a dominant political and military power in the Pacific area of Asia, took Japan under its control and participated in the Korean and Vietnam wars. He considers that the second aspect was that China and India started to concentrate on their home affairs and that a dynamic economic development started.

AMERICA REACTS

The USA became the biggest economic power in the world in 1871, it kept this status until 2014, when China took this place. This raises questions about how long the USA can maintain its political hegemony. RISK OF WAR Since World War II, the situation has been constantly escalating in the East Asian region, to such an extent that by 2015 the American, Japanese and Chinese naval and air forces pose a constant challenge for each other in the fields of navigation and aviation in the debated areas (East and South Chinese Sea). The author treats the states in the region and their relations with China one after another considering that each can become a source of conflict, but the big question is as to what the real plans of China are. May it be preparing for war with its neighbours or even with the Unites States? What does it exactly mean to be an emerging superpower in the 21 st century? AN END TO HIDE AND BIDE The title of the chapter refers to the 24-character foreign policy directive that reminds Chinese leadership to hide their capabilities and wait

The Pivot to Asia policy announced during Barack Obama’s presidency and Hillary Clinton’s tenure as Secretary of State, was the most important reaction from the USA. This means a retreat from the Middle East and a turn to East Asia and emerging China. This step, however, was widely criticised, because the military aspect became more emphatic and American legislation failed to take the fact into consideration that China threatened American power mainly in economic terms, which was clearly proven by the establishment of the Asian Infrastructure Investment Bank in 2015. America and its allies announced in reply the Trans-Pacific Partnership (TPP). The Obama administration intended to assign a major role to Japan, one of the most important allies in East Asia, which also has a very important balancing role against China. JAPANESE AND KOREAN DILEMMAS The relationships between Japan, the two Koreas and China are troubled with conflicts. Japan’s colonisation endeavours shadow its relations with the other countries even today. This chapter focusses mainly on Japan and its prime minister, Shinzo Abe, his person and the ambivalent approaches towards him, and also the evolution of his relationship with South Korea. The author also highlights the role of China in relation with North Korea, and points out that South Korea under Park Geun-hye’s presidency developed

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“In his opinion, the Middle East played a major role in the Eastward shift in power, and the decline of America, Europe and the Western world.”

how the country can position itself and become a leading power under Modi’s presidency. The question of the increasing Hindu nationalism that is gaining ground, and the Indian-Pakistani relations are also covered. This leads to India’s relationship with China, because China is on good terms with Pakistan. The border disputes between India and China, that burdens their relations, should neither be left out of consideration. Rachman also makes the point that all three countries are nuclear powers, which implies significant danger in the case of a conflict. He explores India’s relationships with countries in

an increasingly close relationship with China, which raised concerns in Tokyo and Washington alike. The most significant danger for America and Japan is posed by the growingly confident China’s policy that tries and gains more influence in East Asia, where conflicts might arise among the countries as a result.

East Asia and South Asia, its influence in Africa, and highlights relations with America and Japan. Finally, he comes to the conclusion that China’s growing influence will encourage India, Japan and America to cooperate more closely in order to create a counter-weight axis.

MIDDLE EAST - THE CRUMBLING OF THE WESTERN ORDER Rachman discusses US and Russian interventions in the Middle East countries, the significance and role of those countries in the region. He gives extra emphasis on the importance of the personality of Khadhafi and Assad in the region, and also sheds light on past events and current conflicts. At the end of the chapter, the question of Israel is discussed with more emphasis. The author considers Israel a little island of the western world in the Middle East, because it maintains significant relationships with the USA, while China plays an increasingly important role in its foreign policy at the same time. In Rachman’s opinion, the Middle East has played a major role in the current Eastward shift in power, and the decline of America, Europe and the Western world. EUROPE AND ITS WELL-SEALED WINDOWS

QUESTION OF AMERICAN POWER BATTLE FOR SOUTHEAST ASIA Rachman starts presenting the significance of Southeast Asia by introducing the Strait of Malacca, which has great strategic importance, because the raw materials feeding Chinese industry arrive to the country through it, so in case of a Chinese conflict, America could close the Strait creating a first mover advantage. This is why Singapore is maintaining a balancing policy between the West and the East, which could easily lead to offending one side. Then he goes on to discuss the relationship between ASEAN and China and points out Chinese territorial claims and building artificial islands. At the end of the chapter the author places Australia in the East-West context. Although the country has western values, still begins to gradually come under the influence of China, because it has a fairly significant economic role. Therefore, it struggles with the serious dilemma whether to orientate towards the East or to the West. INDIA, THE SECOND ASIAN SUPERPOWER The author starts the chapter with the comparison of India and China, then adds that although there are differences, India’s role still depends on

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After the first part, the author moves away from Asia and continues examining the question of the shift to the East from the points of view of other regions and countries. First, he analyses the situation of the USA, the other most important actor in this question beside Asia. He gives account on the country’s role and influence in the world. The author talks about the Obama administration with criticism and considers its leadership weak. Several times Obama did not want to cross that certain “red line”, which – in Rachman’s opinion – lead to the decline of American hegemony. This is partly the cause of the change in foreign policy that we usually refer to as the Pivot to Asia. It aims to take on the role of balancer in the Asian Pacific region in order to contain China’s increasing influence.

In this chapter the author gives an overview of recessions in Europe (Italy, Greece), and highlights the leading power of France and Germany at the beginning. Later he observes that as a result of the global economic crisis the European power has definitively moved to Berlin, and that after the Euro crisis everybody considers Germany the leader of Europe. The crisis in the Middle East generated a protracted problem that Europe has to face, namely migration.

“…as a result of the global economic crisis, the European power has definitively moved to Berlin, and after the Euro crisis everybody considers Germany the leader of Europe.” In 2014 Putin visited China and agreed on a closer cooperation between the two countries, which appears to be a “win-win” relationship, because Russia helps feed China’s appetite for energy, and that is profitable for the Russian economy. The improving relationships of the two countries pose a new strategic, economic and ideological challenge for the world lead by America. BORDERLANDS

According to Rachman, the biggest problem is the erosion of European armies, which led to fully entrusting the NATO with Europe’s security and protection. He considers this policy unsustainable. Partly this is why Europe has to face the Russian threat. RUSSIA TURNS EAST

The author also examines the structure of the NATO, America’s position within it and the changes that it wants to implement. As a summary, he shares his opinion that the number of countries questioning the USA’s ambitions to act for the leading position is growing all around the world, which is clearly caused by the USA’s unwillingness to engage in full military intervention in the Middle East, which, as a result, has sunk into violent anarchy.

come up with his own turn toward Asia approach, because western countries introduced severe sanctions against Russia, and the attempt to join the western world and blend in with it proved to be a failure after the dissolution of the Soviet Union.

After the dissolution of the Soviet Union, Europe regarded Russia as an entity that had lost its global power and had no other option that to turn west and take western models to rely on. But the plan of the Eurasian Union failed when Ukraine opened up towards the European Union, then the conflict between the two countries over the Crimean Peninsula caused again a situation resembling the cold war era. Thus, Putin had to

This chapter gives details about Ukraine, Turkey, and Hungary, and the leaders of these countries. Rachman talks about Ukraine’s bitterness about being squeezed between western and eastern interest spheres, in the shadow of corruption and revolutions, and facing the increasing Russian aggression. Turkey fights similar dilemmas with the western and eastern world. But the country is gradually moving away from the West since Erdogan came to power. He would like to restore the past mightiness of the Ottoman Empire and give back the country its Muslim heritage. In the author’s opinion, Hungary during the period of Viktor Orbán as prime minister is taking an authoritarian turn, and its new constitution limits the freedom of the media, due to which

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the relationship between Budapest and Brussels became considerably tense. The fence built to stop the refugee flow was sharply criticised by liberals, but the European nationalistic and conservative political powers regard it as a model to be followed. Although different in nature, the processes going on in Hungary, Turkey and Ukraine clearly signal the declining strength of the European Union, the main pillar of westernisation.

As a result, Japan has taken steps to increase its influence in two regions, and a competition with China has started. Nevertheless, for the countries of the region the Chinese non-intervention policy is much more acceptable. The author also deals with the BRICS founded by China, which includes the two most influential countries of Latin America and Africa: Brazil and the South African Republic.

AFRICA AND SOUTH AMERICA

This chapter examines why the world still thinks that certain Western institutions are determinant for the global economic and political order. These include, among others, the UN, the World Bank, the IMF, and some smaller profile organisations like Swift, ICANN and FIFA. Although these organisations have less political influence, their international control and management still became significant measurements for prestige and power. Therefore, the author attributes a major role to the economic and political institutions, which can be considered inherent in power. Consequently, the main question is when these institutions will be born in or moved to Asia.

Rachman thinks that Obama’s personality gave an excellent opportunity for America to build good relationships with Africa, but he considers that it is a completely different question what has been realised from that. Where America and the Western world saw no hope, China discovers hidden opportunity. Since China’s industry is rapidly growing, it needs raw materials that Africa is abundant in; Africa needs infrastructure investments that are being sought by Chinese companies. This two-way trade with Africa grew twenty-fold between 2000 and 2010, and China became the largest economic partner for the black continent. The Latin American countries have always felt that they live in the shadow of the US economy, but now they have discovered that they also have opportunity, which they have found in China.

THE WEST’S INSTITUTIONS

SUMMARY In his book, Gideon Rachman formulates the statement that Western dominance and power is shifting East and to Asia. He regards China to be

most likely to take over the American hegemony, so he mainly focuses on this country. Rachman attempts to support and explain these statements in his excellent and well-structured book, which gives a masterly account on the currently ongoing transformations in the international balance of power. He considers the 2008 global economic crisis the major turning point, but also highlights deeper causes, like America’s non-intervention in the Middle East and the weakness of the Obama administration. He explores his thesis starting from Asia, through the most significant countries, with special focus on China and its two largest rivals: Japan and India. Then gradually takes a more distant view, and observes the question of “easternisation” from a global perspective while dealing with Europe, Russia, the Middle East, Africa, Latin America and the United States. In each of his accounts he highlights that the majority of countries have disappointed in western power led by the USA and turn to the East as an alternative, which China is attempting to take advantage of.

RACHMAN, Gideon: Easternisation. War and Peace in the Asian Century. London, The Bodley Head London, 2016. Number of pages: 336 Publishing company: Other Press Published: 4th April 2017 ISBN-10: 1590518519 ISBN-13: 978-1590518519

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lower castes start from a particularly disadvantageous situation. Reversing the process partly cherished by British colonisers takes long decades. The public social spending of the country is only between 3 and 4 percent of GDP, compared to China’s more impressive 7 per cent. The Chinese Communist Party effectively tackled the problem of poverty, lifting 400 million people out of poverty, which is still the base for legitimating its power. Slums, frequent in India, are not typical in China, partly thanks to the housing projects implemented in the country’s interior, which provide great masses of people with

Author: Fanni Maráczi

homes. Increasing inequalities, however, pose a serious problem – while the GDP per person in coastal cities is close to that of Portugal, the per capita GDP of interior provinces resembles that of Congo.

Anja Manuel’s book, published in March, 2017, is an excellent summary of China and India’s current situation, keeping in view all along the aspects that are of particular importance for the USA. She briefly outlines the history of the two countries, focusing on major events and factors still shaping national conscience. After that, she describes the operations of the two emerging powers along topics that are most important for the USA, and also gives advice on improving cooperation. She keeps on emphasizing that the rise of these two vast countries should not provoke fear in the USA, the rise of their economies will increase the market of American products. Her major advice is maintaining good relations and avoiding both bilateral and multilateral conflicts. Manuel’s book can provide laymen with a sophisticated summary, while experts of the topic can find the personal anecdotes and examples of the author interesting.

LONG MEMORIES Anja Manuel starts her book with a brief introduction of China’s and India’s history, looking at the salient points. Both countries have histories of several thousands of years, and this civilisationconsciousness still affects the way their peoples think. She writes about major schools of philosophy and religions, pointing out how Confucianism and Hinduism continue to shape politics to this day. She dwells on the marks left by humiliation by Western powers in the case of China and the colonialism in the case of India. She describes how the Chinese and the Indian economy have achieved their current levels. Furthermore, she introduces the most prominent historical figures, although she seems somewhat biased when linking the introduction of popular Gandhi with Mao Zedong,

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described previously in the book. She provides a comprehensive account of the political regimes of the two countries, the history of the Chinese Communist Party, and the recent decades of the Indian government. Finally, she briefly presents the most important elements of the bios of President Xi Jinping and Prime Minister Narendra Modi, and their rise into power. She skilfully collects the information required for the USA, aiming at strengthening and improving relations with China and India, to have a better understanding of the considerations underpinning the mindset and foreign policy of the two giants. SHARING THE WEALTH India has a much longer road to go to eradicate poverty than China. Some three hundred million people live under the poverty line of $1.25, and

urban slums home some sixty-five million people in India. While the schooling of children could show a way out of poverty, often their parents do not allow them to go the extremely low-level institutions – as their work also contribute to the modest income of their families. The fact that more than 90 per cent of the population work in the so-called informal sector and are harder to target with benefits and other assistance makes India’s situation even worse. Only a very small number of Indian people hold bank accounts, which also aggravates the situation. The current system of benefits is plagued by a high level of corruption, the distributors of food aid often withhold even as much as one-third of the food, and sell them for cash. Despite the state’s several positive anti-discrimination measures, a high number of the poor are Muslims, or members of the “untouchable” Dalit community. The caste system persists in the mindset of Indian people and the members of

Although people do not concentrate in slums in China, the life of rural migrant workers is not easy. The book tells the story of two young girls who work in a factory assembling phones in Shenzhen six days a week and sleep in a dormitory room with other two workers. For migrant workers, it is the hukou system that represents the greatest difficulty, which allows citizens to receive social benefits only in their place of birth. Thus, the masses migrating from rural areas to the cities cannot expect any benefits. There have been several attempts to reform the system, but it is an extremely difficult task, regarding that most work opportunities are provided by the megalopolises of the Eastern Coast, therefore migration is concentrating here, which, in some form, must be curbed. It was announced in 2014 that 100 million migrant workers would be given an urban hukou by 2020. But there are some ridiculous conditions, such as how many times the migrant gives blood. She advises US leadership that US giant corporations operating factories in these countries should be more attentive to working conditions, ensure health care and other benefits for workers. These corporations, using the cheap workforce of the country, contribute to the fact that millions of people live under harsh conditions; in addition, they could effectively improve their situation.

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BANISHING BRIBES The presence and social acceptance of corruption presents a great problem in both countries, making it harder for foreign companies to succeed, and preventing inbound investments.

among others, holding transparent auctions for private sector permits and contracts.

Corruption means significant loss to the economies of the countries, draining considerable funds from public services. In China, one estimate concluded that a full 10 per cent of government spending is either misused as bribes or simply stolen. Permits sold in a corrupt manner then lead to poor-quality buildings that will crumple

The most effective solution, however, has come from billionaire Internet entrepreneur, Nandan Nilekani, who is celebrated as a kind of folk hero. He created Aadhaar, a programme that generates a national identity number for every Indian by taking their fingerprints and iris scans, therefore their identity is easy to check, even in a mobile phone application. With this latter function, citizens can identify themselves with their mobile phones and get access to the assistance to which they are eligible.

in the first natural disaster, killing thousands of people.

THE YOUNG AND THE OLD

While India’s higher education standards are rather high in the IT sector, and graduates make good professionals, brain drain causes serious problems, and numerous Indians with university degrees emigrate to, for example, the USA, for work. For the United States, building private health care facilities in both countries might present a market, and also for pharmaceutical companies and operators of retirement homes, as there is an increasing number of Chinese and Indian people who can afford these. These highly experienced companies can help China gain the know-how required for caring for its aging population. ENERGY VS. THE ENVIRONMENT

Xi Jinping’s anti-corruption campaign, the ‘tigers and flies’ movement has led to the punishment of several powerful politicians and military leaders. While some think that it is simply a purge of Xi’s political rivals, it might have a positive impact on the attitude of the country’s population. For the Chinese, several corrupt practices are part of the ceremony of making business, while for their US counterparts is sheer bribery – such as the custom of giving gifts, which is part of the tradition in India. The question remains, however, as to whether the amounts published – possibly taken by members of the Communist Party – serve the reassurance of the people or they unveil the extent of corruption unknown before, weakening confidence in the Party. While in China ordinary people do not object corruption, protests are frequent and private individuals are involved in the combat in India. In addition, India’s legal system is more developed than that of China, and includes several anti-corruption laws. However, the country’s rampant bureaucracy still allows room for illegal practices. As we have already mentioned in connection with benefits, the official distributing food portions sells some of it to the poor for cash, resulting in the indignation of ordinary people. Partly, it was the protests of activists that led to the defeat of the Congress Party, and helped Prime Minister Modi form his government. The BJP Party campaigned hard on fighting corruption, and they seem to have succeeded in making changes in New Delhi since they were swept into office, by,

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An aging population presents an increasing problem for China. At the moment, there are more than 200 million people in China over the age of sixty, but this age group is set to double by 2030. While the family planning policy adopted in 1980, which partly caused the problem, has been demolished, the process seems irreversible. The traditional Chinese model of children and grandchildren caring for the elderly when they are incapable of work puts the burden of supporting their families of eight on the shoulder of only children. While also the government acknowledges its irrationality, no pension scheme has been established to cover the entire population. Another task to resolve is expanding the health insurance scheme, as currently it covers only 40 per cent of the costs of treatment, and many poor people do not even know about this partial support. Their elderly care is, however, still enviable compared to India. We have already mentioned the difficulty of targeting Indian citizens, but the real problem is collecting the contributions. The state has no means to collect the amount required for elderly care from the wages paid in the informal sector. Pension, however, is not a primary issue that India’s young society must resolve; for them, employing their youth bulge and taking advantage of the resources that they represent in order to drive economic growth poses a challenge. Their education system is extremely underdeveloped, more than 300 million Indians are illiterate, and the average time spent in education is five years.

The Chinese government and ordinary people are more and more concerned by the danger of environmental degradation, and several breakthroughs have been made in this field. Their motivation is quite understandable; air pollution has detectably decreased life expectancy in cities even though city dwellers spend entire days wearing face masks, and their complaints have reached the uncensored domain, thus leadership cannot leave them unaddressed. The situation is even worse in India, the quality of air in cities is well behind that of China, and WHO has recently revealed that thirteen of the most polluted cities of the world can be found in India. The view that improving the situation of the poor is incompatible with environmental stewardship persists, but there are glimmers of hope as a new generation of officials and business leaders can see a solution increasingly important. The rigid attitude of the older ones, however, hinders international cooperation in transforming energy production. Replacing coal-based energy production with renewable energy sources lies in the interest of both countries. China is the world’s number one coal producer and user, and India is second. The difficulty of the transition is mainly caused by the low price of coal, and there is a long road that the emerging giants have to go until all layers of their societies are provided with energy, thus its cost is not negligible at all.

Providing clean water is another central task. Due to China’s unfortunate geographical features, its northern half is much drier than the southern areas, and the rivers supplying these areas originate from Tibet – thus, it is strategically crucial to secure this province. India’s water supply is sufficient, but it lacks modern infrastructure – instead of using modern irrigation methods, small farmers dig their ever-deeper wells themselves, severely depleting the groundwater. Water treatment of the rivers is yet to be solved, the waters of the Ganges are extremely polluted because of overpopulated cities and water rituals, but it does not discourage local people from bathing in the river. There has been a plethora of schemes to clean up the Ganges, but the central government cannot persuade the leadership of the states to take action. Water shortages could cause conflicts between the two countries, as the River Brahmaputra runs from the Tibetan plateau to India and the Chinese Liberating Army has already come up with the idea of diverting its waters into China. Although it poses a technological challenge, if implemented, it is the most likely to lead to a military conflict. If the pollutant emissions of the two countries make climate change accelerate, it is definitely dangerous also for the USA, thus it is in its interest to help China and India reform their energy production. However, they often feel the attention focussed on them unfair, as their pollutant emissions still have not exceeded that of the USA or Europe. As China is at the vanguard of developments related to green energy, cooperation could be beneficial also for the USA, and it is not as a sensitive topic as it used to be. MANAGING DISCONTENT The existence of censorship filtering Chinese press and internet extremely effectively does not bother the majority of the society. Although they are aware of the fact that their messages are monitored, they see it as a kind of deal in exchange for living under much better circumstances under the Communist Party than their ancestors did. Land grabs, labour reforms, freedom of religion and pollution are topics that trigger protests. Although the Internet permits some dissent at the margins, we can hardly talk about

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THIS BRAVE NEW WORLD – INDIA, CHINA, AND THE UNITED STATES BY ANJA MANUEL

a civil society. Interestingly, it was censorship that has brought about the change experienced in the younger generation: as the events of the 1989 Tiananmen Square crackdown are often completely unknown to Chinese people growing up afterwards, the memory of the state’s violent intervention does not discourage them from expressing their opinion in an ever-more assertive manner. This change of attitude and social tensions are expected to reach a kind of breakpoint in the coming decades. Until then, however, the Party continues to apply manipulation by nationalist sentiments – such as mentioning the war crimes of the Japanese or the Diaoyu island dispute – if Chinese citizens seem too discontent for any other reason. India’s situation is completely different. Free elections have been held since India gained its independence in 1947; citizens are granted freedom of speech and they use it. Surprisingly, with thousands of annual protests and countless nonprofit and citizen advocates, India ranks a low 80 out of 199 countries in press freedom. The government sometimes blocks political content online, some bloggers are arrested and there is violence against journalist as well. The government is suspicious of non-profit organisations, especially those receiving foreign funding. The United States can attempt to call on India to curb censorship on online content and stop restricting the work of non-profit organisations – these are not impossible to attain. THE NEW MERCANTILISTS Aid has a central role in the diplomacy of both countries. While India legs behind China in terms of the amounts dedicated to this purpose, it spends a lot on its close neighbours, emphasising that it defines itself a peaceful power. Although India is the home of one-fourth of the world’s poor, Hinduism and Islam are both religions encouraging helping others, thus the government pursues an aid policy lacking explicitly political interests.

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In its aid policy, China is a 21 st-century mercantilist – it helps its own companies and drive economic growth by increasing grants, government loans, direct investments and trade. Conditions of Chinese aid are not as harsh as the ones related to Western aid, but China has a very different definition of aid. The various investments, almost without exception, provide work for Chinese companies. The investment projects of One Belt, One Road (OBOR) initiative will all be implemented through Chinese loans. These allow China to use its large foreign capital, and also provide work for its state-owned companies struggling with overcapacities. And the countries concerned are more likely to feel grateful and side with China in a potential dispute. The USA is concerned by China’s activity. If it is not the USA that grants aid, then it cannot influence the specific countries by imposing the conditions. For India, China’s expansion in Southeast Asia may raise concerns. Traditionally, India has had a leading role in this region, but might feel increasingly surrounded. Neither the USA or India has other choice than encouraging closer trade relations with the other two countries, maintaining the good rapport and avoiding conflicts. THE WORLD THEY WILL MAKE The currently functioning international organisations were established after World War II had been closed, and were construed according to the norms of Europe and the USA. In their current state, they are obsolete, and emerging powers cannot find their place in them. China has the second largest national economy but still does not fulfil a position fit to its size in such organisations as the WTO or IMF. The two giants should be involved in their reforms not just because of their economic might but also because their experiences could be valuable for the West. China’s growing role is demonstrated by the establishment of the Asia Infrastructure Investment Bank (AIIB), with India as an enthusiastic member, as it could help with the infrastructure developments of the country. Washington has so far refused to join, although its fears seem

pessimistic. AIIB, for example, will grant loans in US dollars and not renminbis, as it was feared earlier, and Chinese capital will enable such infrastructure developments that have been never implemented during the sixty year-long operations of the World Bank. China is increasingly active in the UN as well, contributing considerable amounts to the budget of peacekeeping forces. This, again, should be reassuring for the United States, since China is not unwilling to participate in existing organisations, it just simply seeks to assert its rights. As for UN membership, India pursues the policy of non-commitment, voting with the USA in less than one-third of the cases. There is a plan to include India in the Security Council, but both China and Russia object. Veto rights in the World Bank and IMF should be reformed, too, and the two giant should be encouraged to enter into mutually beneficial regional trade agreements. Naturally, India and China want to assert their rights and increase their influence, and will not always agree with the USA. This must be respected by the US party. The existing organisations, however, should not lower the standards related to environment or labour; the two countries should accommodate to them. As they both seem more willing to take more responsibility, the USA should take advantage of their resources, and shape the international system more equitable together with them.

China’s activity is, however, put in a new perspective if we imagine what it can see from its coast towards the sea: from Japan as far as Taiwan and the Philippines, there are islands of powers that are hostile, or at least cool towards China. This area, called as the “first island chain” by the Chinese partly justifies China’s attempts to create its own bases on these waters. Passage through the Strait of Malacca is crucial, as oil from the Middle East to China moves through here. China’s growing activity – especially around the Pacific Ocean and the Himalayas – has increased India’s military spending, and Modi raised the country‘s defense spending by 30 per cent to $52 billion for the fiscal year 2016-17, and asked the United States to help it build several modern aircraft carriers. Since the end of World War II, the USA dominated the region of the Pacific and the Indian Ocean, but this period has ended. The USA must acknowledge this, as well as the fact that their “Pivot to Asia” policy might sound threatening to the Chinese. China has become a power of such size that could have an army of that size; it is a natural process. Manuel suggests more frequent communication with China, and laying down sound rules about what is acceptable for the United States and what is not, for example, in cybersecurity. She also pushes for joint military exercises, recommending that the USA and India should also involve China in these. CONCLUSION

THE NEXT MASTER AND COMMANDER With its emphasis on soft power, India has not made many enemies. India’s leaders have been mostly preoccupied with Pakistan and China. There have been several border disputes over the Himalayan border since the times of British rule, and nowadays the concentration of China’s infrastructure developments in the region causes tensions. For India, the developments implemented within the OBOR framework might also raise concerns – China is building such facilities in the region that could be converted for military purposes, such as ports, which, in addition to trade, can also serve as a base for navy.

Manuel recommends that the unites States should take post-independence British-American relations as an example in their attitudes toward China and India. Great Britain treated the upstart United States with subtlety, knowing that maintaining good relationships was ultimately its interest, and that the Americans saw them as a model because of their position of advantage. Thus, Anja Manuel’s advice includes tolerance, cooperation, taking into account the legitimate interests of the two countries, but, at the same time, assertively pushing back on border encroachments; and ultimately, creating a peaceful co-existence, enjoyed by all three countries.

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Nemzeti Fejlesztési Minisztérium (2012): Nemzeti energiastratégia 2030. in: Kormány.hu. 2012. http://2010-2014.kormany.hu/download/4/f8/70000/Nemzeti%20 Energiastrat%C3%A9gia%202030%20teljes%20v%C3%A1ltozat.pdf Last viewed: 2017.03.31. Nemzeti Fejlesztési Minisztérium (2014): Nemzeti Közlekedési Infrastruktúra-fejlesztési Stratégia. in: Kormány.hu, 2014. August h t tp: //w w w. ko r m a ny. h u /dow n loa d / b/8 4 / 10 0 0 0/ N e m zeti % 20 K%C3%B6zleked%C3% A9si% 20 Infras truk t%C3%BAra fejleszt%C3%A9si%20Strat%C3%A9gia.pdf Last viewed: 2017.03.31.

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Nemzeti Fejlesztési Minisztérium (2015): Második Nemzeti Éghajlatváltozási Stratégia 2014-2025 kitekintéssel 2050-re. in: Kormány.hu, 2015. február http://2010-2014.kormany.hu/download/7/ ac/01000/M%C3%A1sodik%20Nemzeti%20 %C3%89ghajlatv%C3%A1ltoz%C3%A1si%20Strat%C3%A9gia%20 2014-2025%20kitekint%C3%A9ssel%202050-re%20-%20szakpolitikai%20vitaanyag.pdf Last viewed: 2017.03.31. Pavlicsevics, Dragan (2016): The Geoeconomics of Sino-Serbian Relations: The View from China. In: Stanzel, Angela – Kratz, Agatha – Szczudlik, Justyna – Pavlicevic, Dragan: China’s Investment in Influence: The Future of the 16+1 cooperation. European Council on Foreign Relations Perger András (2017): Paks II.: Az évszázad rulettje. HVG.hu, 2017. március 31. http://hvg.hu/gazdasag/20170321_Paks_II_Greenpeace_veszteseg_befektetes_kozpenz Last viewed: 2017.03.31. Péti Márton (2014): Magyarország Partnerségi Megállapodása 2014–20. in: Falu Város Régió 2014/2, p. 13. Stanzel, Angela (2016): Dividing Without Antagonising: China’s 16+1 Image Problem. In: Stanzel, Angela–Kratz, Agatha–Szczudlik, Justyna–Pavlicevic, Dragan: China’s Investment in Influence: The Future of the 16+1 cooperation. European Council on Foreign Relations Székely-Doby András (2012): Technology Policy, R&D, and Innovation in China Traditional Approaches, and New Challenges. In: Podruzsik Szilárd– Kerekes Sándor (szerk): China – EU Cooperation for a Sustainable Economy. Corvinus University of Budapest, Faculty of Business Administration, pp. 57-72. Szunomár Ágnes (2011): A magyar-kínai gazdasági kapcsolatok új szakasza: eredmények és várakozások. Külgazdaság LV. évf. 11-12. sz. Szunomár Ágnes (2015): Blowing from the East. International Issues & Slovak Foreign Policy Affairs, 24/3, 2015 Kong Tianping (2015): The 16+1 Framework and Economic Relations Between China and the Central and Eastern European Countries. in: CritCom (A Forum for Research and Commentary on Europe), 14th December 2015 http://councilforeuropeanstudies.org/critcom/161-framework-and-economic-relations-between-china-and-ceec/ Last viewed: 2017.03.31. TRACECA (2017): Transport Corridor Europe-Caucasus-Asia: Welcome to TRACECA. in: www.traceca-org.org, Last viewed: 2017.03.31. Turcsányi, Richárd (2014): Central and Eastern Europe’s courtship with China: Trojan horse within the EU? Institute for Asian Studies Publication, in: Asian.sk, 22nd January 2014. http://www.asian.sk/wp-content/uploads/2014/08/china-cee.pdf Last viewed: 2017.03.31. Vidékfejlesztési Minisztérium (2013): Nemzeti Vízstratégia a Vízgazdálkodáseól, Öntözésről és Aszálykezelésről. in: Élőtiszáért.hu, 2013. március www.elotiszaert.hu/download.php?id=577 Last viewed: 2017.03.31. Zelki, Benjamin (2017): Csak Kínának éri meg a 750 milliárdos Budapest– Belgrád-vasútvonal. in: HVG.hu, 2017. május 18. http: //hvg.hu /gazdasag/201 70518_budapest_belgrad_vasutvo nal_750_milliard Last viewed: 2017.05.31. New Silk Road – Transport Connections Acemoglu Daren (2009): Introduction to Modern Economic Growth. Princeton University Press, New Jersey. Alphaliner 2017: https://www.alphaliner.com/top100/ Balme, Stephanie – Dowdle, Michael W. (eds.)(2009): Building Constitutionalism in China. Palgrave MacMillan, New York. Barro, Robert J. – Sala-i-Martin, Xavier I. (2003): Economic Growth. The MIT Press, Cambridge (USA), London (UK). Breslin, Shaun (2007): China and the Global Political Economy-Palgrave Macmillan UK Broadman Harry G. (2007): Africa’s Silk Road. China and India’s New Economic Frontier. World Bank, Washington. Central Intelligence Agency (CIA)(2008): Global Trends 2025 report, November, Central Intelligence Agency, Washington, DC, http://www.dni. gov/nic/PDF_2025/2025_Global_Trends_Final_Report.pdf Chen Chunlai (2009): China's Integration With the Global Economy. WTO Accession, Foreign Direct Investment and International Trade. Edward Elgar Cheltenham, UK • Northampton, MA, USA. Chin, Gregory T (2010): China's Automotive Modernization - The PartyState and Multinational Corporations, Palgrave MacMillan, Basingstoke, New York. Daimler Benz (2017): High Tech Report, Daimler Benz, Stuttgart Flachner Balázs (2017): Kína gigászi útépítő projektbe kezd. www.index.hu 2017. 02. 28. Garnaut, Ross – Song, Ligang – Woo,Wing Thye (2009): China’s new place in a World in crisis. Economic, Geopolitical and Environmental Dimensions. ANU E Press, Canberra Gere László – Simigh Fruzsina (2016): Válságban a tengeri szállítmányozás. 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Walter, Carl E. – Howie, Fraser T. J. (2001): 'To Get Rich Is Glorious!' China's Stock Markets in the '80s and '90s. Palgrave Publishers, New York. Wang Megkui (ed.)(2009): China in the Wake of Asia’s Financial Crisis. Routledge, London, New York. World Economic Forum (2015): Emerging Best Practices of Chinese Globalizers: Develop the Innovation Model, WEF, Genf World Economic Forum (2015): How Technology Can Unlock the Growth Potential along the New Silk Road, WEF, Genf World Economic Forum (2015): The Global Competitiveness Report 2015–2016. WEF, Genf Wu Zhongmin (2009): China in the World Economy. Routledge, London & New York. Xian Songzuo: Searching for an anchor of the international monetary system. A case study of RMB exchange rate. Yang Keming (2013): Capitalists in Communist China. Palgrave Macmillan UK Yu Zheng (2014): Governance and Foreign Investment in China, India, and Taiwan. The Michigan University Press, Ann Arbor. The Future Geography of the New Silk Road Bőgel György (2008): A Schumschumpeteri „termelõ rombolás” módjai az infokommunikációs iparban, Közgazdasági Szemle, LV. évf., 2008. április http://epa.oszk.hu/00000/00017/00147/pdf/04vszbogel.pdf Last viewed: 2017.02.27. Butoed Millsaps, Bridget (2017): 3D Hubs. https://3dprint.com/141228/3d-hubs-trends-july-2016/ Last viewed: 2017.02.27. Burmeister, Klaus – Neef, Andreas (2005): In the Long Run, Corporate Foresight und Langfristdenken in Unternehmen und Gesellschaft, München Christensen, Clayton M. – Anthony, Scott D. – Roth, Erik A. (2004): Seeing What’s Next, Harvard Business School Press, The Economist, Boston, január 5. Conway, Martin A. (2015): Foresight: an introduction. A Thinking Futures Reference Guide. Thinking Futures Melbourne, Australia Csizmadia Norbert (2016): Geopillanat. A 21. század megismerésének térképe. L’Harmattan. Párizs - Torino - Budapest. Daheim, Cornelia et al. (2016): Foresight Competency Model pp 1-16. Elérhető: http://www.apf.org De Toni, Alberto. Felice. et al. (2015): Antipare il Futoro: Corporate Foresight, Biblioteca dell’Economia d’Azienda, Egea spa Hideg Éva – Korompai Attila – Kovács Géza – Nováky Erzsébet (1997): Jövőkutatás. Aula Kiadó Kft, Budapest. Inayatullah, Sohail (2013): Futures Studies. Theories and Methods. In: Junquera, Fernando Gutierrez (Ed.), There’s a Future. Visions for a Better World, Madrid: BBVA. pp. 36-66 Jeney László (2010): Paul Krugman szakmai életrajza. Corvinus Regionális Tanulmányok 1.1. KNOMEA 2017: http://knoema.com/atlas/Hungary/topics/Foreign-Trade Last viewed: 2017.03.15. Kristóf Tamás (2002): A szcenárió módszer a jövőkutatásban. Jövőtanulmányok: 19. füzet. Budapesti Közgazdaságtudományi és Államigazgatási Egyetem, Jövőkutatás Tanszék, 2002. Kuosa, Tuomo (2012): The Evolution of Strategic Foresight: Navigating Public Policy Making, Gower publishing, 2012 June Rohrbeck, Rene et al (2007): Strategic Foresight – a case study on the Deutsche Telekom Laboratories, ISPIM Asia Conference, New Delhi Schultz, Wendy L. (2006): The cultural contradictions of managing change: using horizon scanning in an evidence-based policy context, Foresight Vol 8.No. 4. Schumpeter, Joseph (1980): A gazdasági fejlődés elmélete. Közgazdasági és Jogi Könyvkiadó, Budapest. Tommei, Stefano – Sacio-Szymanska, Anna (2016): Bevezetés a foresight módszertanába. In: Foresight az üzleti szektorban (Hideg Éva et al szerk.) Nemzetközi Visegrádi Alap Tózsa István (2017): Ország érték. – Gazdaságföldrajzi, Geoökonómiai és Fenntartható Fejlődés Intézet, BCE, Budapest. Letölthető: http://akk.uni-nke.hu/uploads/media_items/tozsa-istvanorszag-ertek-1.original.pdf Veigl Helga (2006): Jövőkutatási alapfogalmak új megközelítésben [Terms of Futures Studies in new approach]. In: A jövőkutatási fogalmaktól a „stratégián túl”-ig, [From terms of Futures Studies until ‘Beyond Strategy’] MTA-BCE Komplex Jövőkutatás Kutatócsoport Füzetek 7. Vergragt, Philip J. – Quist, Jaco (2011): Back-casting for sustainability: Introduction to the Special Issue. Technological Forecasting and Social Change, 78 Gideon Rachman – Easternisation. War And Peace In The Asia Century RACHMAN, Gideon: Easternisation. War and Peace in the Asian Century. London, The Bodley Head London, 2016., Other Press, 336. 2017. April 4. Yukon Huang: Cracking The China Condrum Huang, Yukon: Cracking the China Conundrum – Why Conventional Economic Wisdom Is Wrong. Oxford University Press 2017 China's Asian Dream: Empire Building Along New Silk Road MILLER, Tom : China's Asian Dream: Empire Building along the New Silk Road, Zed Books, 2017 Michael Wesley: Restless Continent: Wealth, Rivalry And Asia's New Geopolitics WESLEY, Michael: Restless Continent: Wealth, Rivalry and Asia’s New Geopolitics. Overlook Duckworth, 2016. Anja Manuel: This Brave New World - India, China, And The United States Manuel, Anja: This Brave New World: India, China, and the United States. Simon & Schuster, 2016., 368.

LIST OF PICTURES AND FIGURES An Introduction of the “16 + 1 Cooperation” 1. picture: wikimedia

6. figure: Németország és Kína gazdasági erejének az összehasonlítása Source: IMF 2017

The Belt and Road Forum in Beijing in 2017 1. picture: wikimedia 2. picture: wikimedia

The European Forum For Belt And Road Cooperation Conference 1. figure: Az Egy Övezet Egy Út szárazföldi és tengeri útvonala Source: Economist.com 2. figure: Adatáramlás a világban (2005, 2014) Source: TeleGeography; McKinsey Global Institute analysis

Shanghai Forum 2017 1. figure: Az Új Selyemút útvonalai Source: Pallas Athéné Geopolitikai Alapítvány és MNB 2. figure: A „Made in China 2025” stratégia és annak stratégiai feladatai Source: http://english.gov.cn/ PRC Ministry of Industry and Information Technology 3. figure: Top 50 magyar reform és innováció Source: MNB 4. figure: Görögország és Magyarország átlagos makroökonómiai teljesítménye 2003 és 2008 között Source: MNB 5. figure: A válságkezelés magyar és görög módja Source: MNB 6. figure: Átlagos adóterhek Magyarországon és Görögországban egykeresős, kétgyermekes házaspár esetén, ahol az átlagjövedelem 100% Source: MNB 7. figure: A hagyományos és a magyar válságkezelés közötti különbség Source: MNB Can China Be the Winner of the Next Industrial Revolution? 1. figure: Bruttó hazai K+F-kiadás (millió USD) Source: OECD 2. figure: Kína részesedése a globális bevételalapból globális GDPrészesedéséhez viszonyítva Source: MGI 2015:5 3. figure: A kínai Tudományos és Technológiai (T&T) Rendszer szervezeti felépítése Source: Dolla 2015:170 4. figure: Kockázati tőkebefektetések a különböző régiókban (milliárd USD) Az adatok Sourcea: Ernst &Young és Citi Research (Citi GPS 2016:8) Rail Freight Transport between China and the European Union on the New Silk Road 1. figure: A Selyemút mentén elhelyezkedő országok logisztikai teljesítménye a Világbank LPI (Logistics Performance Index) listája alapján Source: https://lpi.worldbank.org/international/global 2. figure: Source: https://america.cgtn.com/2017/05/13/5000china-europe-cargo-trains-expected-by-2020# 3. figure: Source: http://www.unescap.org/resources/trans-asianrailway-network-map 4. figure: Source: https://www.rba.gov.au/publications/bulletin/2016/jun/pdf/bu-0616-5.pdf 5. figure: Az Európai Unió tagállaminak teherszállítási teljesítményének megoszlása szállítási módonként (milliárd tonnakm) Source: Saját számítás a European Commission Transport Pocketbook adatai alapján 6. figure: Kína teherszállítási teljesítményének megoszlása szállítási módonként (milliárd tonnakilométer) Source: Saját számítás az NBS adatai alapján 7. figure: Az Európai Unió külkereskedelemének (export+import) megoszlása közlekedési módonként a Selyemúton elhelyezkedő országokkal (érték alapon, euróban) Source: saját számítások az Európai Bizottság kereskedelmi adatbázisa alapján 8. figure: Az Európai Unió külkereskedelemének (export+import) megoszlása közlekedési módonként a Selyemúton elhelyezkedő országokkal (mennyiség alapon, tonnában) Source: saját számítások az Európai Bizottság kereskedelmi adatbázisa alapján 9. figure: Az Európai Unió külkereskedelemének (export+import) megoszlása fajlagos értéke szerint (euró/tonna) a Selyemúton elhelyezkedő országokkal Source: saját számítások az Európai Bizottság kereskedelmi adatbázisa alapján One Belt, One Road from Germany’s Perspective 1. figure: Xi Jinping Duisburgban Source: wikimedia 2. figure: A Made in China program által leginkább érintett országok Source: MERICS 3. figure: A kínai és német működő tőke beruházása egymás országába 2000-1016 között Source: Rhodium Group 4. figure: A hamburgi kikötő öt legfontosabb kereskedelmi partnere Source: Port of Hamburg 5. figure: Hamburg és Pireusz konténerforgalma 2010-2016 között Source: Port of Hamburg

Economic Geography of the New Silk Road 1. figure: Az Új Selyemút Gazdasági Övezet folyosói és csomópontjai és Kína eurázsiai szomszédságát meghatározó, Selyemút Övezetet érintő gazdasági folyosók Source: A China Investment Research és a HKTDC honlapjain szereplő térpictureek alapján Varga Ágnes szerkesztése 2. figure: Az Új Selyemút Gazdasági Övezet folyosóinak összefüggése Kína eurázsiai szomszédságát meghatározó gazdasági folyosókkal Source: A szerzők összeállítása 3. figure: A Selyemút Övezet országai Source: Varga Ágnes szerkesztése 4. figure: A Selyemút Övezet elhelyezkedése a Föld kultúrrégiói között Source: Varga Ágnes szerkesztése The New Silk Road as a Development Policy Factor 1. figure: Az elemzett dokumentumok megoszlása Source: Dányi 2016, HVG 2016, Michigan State University 2016, MIT 2016, Perger 2017 adatai alapján 2. figure: A Budapest-Belgrád gyorsvasút hazai szakaszának becsült beruházási költsége néhány fontos gazdasági adattal összevetve (milliárd Ft) Source: Dányi 2016, HVG 2016, Michigan State University 2016, MIT 2016, Perger 2017 adatai alapján 3. figure: A kelet-közép-európai 16+1 tömörülés országai Source: Szerkesztés Stanzel 2016 alapján készítette 4. figure: A kínai tőkebefektetések alakulása Kelet-Közép-Európában (10000 USD)(2003-2013) (a) Source: Tianping 2015 adatai alapján 5. figure: A kínai tőkebefektetések alakulása Kelet-Közép-Európában (10000 USD)(2003-2013) (b) Source: Tianping 2015 adatai alapján 6. figure: A kínai tőkebefektetések alakulása Kelet-Közép-Európában (10000 USD)(2003-2013) Source: Varga Ágnes szerkesztése New Silk Road – Transport Connections 1. figure: Kína közlekedési infrastruktúrája Source: China Statistical Yearbook, 2016 2. figure: A közlekedési folyosók evolúciója Source: Rodrigue 2017 3. figure: Porter értéklánc modellje Source: saját szerkesztés 4. figure: Fő tengeri szállítási útvonalak Source: Rodrigue 2017 5. figure: Porter értéklánc modellje Source: saját szerkesztés 6. figure: Autópályák hossza az Egyesült Államokban és Kínában Source: Rodrigue 2017 7. figure: Utazás a Transszibériai vasútvonalon Source: http:// regi.1000ut.hu/alt-transzvasut.htm 8. figure: A közvetlen légi járatok napi átlagos száma NyugatEurópa és a Távol-Kelet legfontosabb városai között New York-kal összehasonlítva Source: http://regi.1000ut.hu/alt-transzvasut.htm 9. figure: A globális légi közlekedési piac regionális jellemzői Source: Rodrigue 2017 The Future Geography of the New Silk Road 1. figure: A kínai tőkebefektetések alakulása Kelet-Közép-Európában (10000 USD)(2003-2013) Source: saját szerkesztés 1. táblázat: Lehetőség-tér az OBOR-1 (északi) útvonalon Magyarország számára Source: saját szerkesztés és számítások a KNOEMA adatbázis alapján 2. táblázat: Lehetőség-tér az OBOR 1 (északi) útvonalon az OBORországok szempontjából Source: saját szerkesztés és számítások a KNOEMA adatbázis alapján 3. táblázat: Lehetőség-tér az OBOR 2 (déli) útvonalon Magyarország számára Source: saját szerkesztés és számítások a KNOEMA adatbázis alapján 4. táblázat: Lehetőség-tér az OBOR 2 (déli) útvonalon az OBORországok számára Forrás: saját szerkesztés és számítások a KNOEMA adatbázis alapján

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CREDITS EDITOR-IN-CHIEF Norbert Csizmadia MANAGING EDITOR Anton Bendarzsevszkij EDITORIAL BOARD Ágnes Bernek Anton Bendarjevsky László Körtvélyesi Géza Salamin Péter Szatmári György Szapáry István Szilágyi Ákos Vajas COPY EDITOR István Czene ART EDITORS Gyula Nagy Fülöp Kovács PUBLISHED BY: Pallas Athéné Geopolitical Foundation H-1013 Budapest, Döbrentei utca 2., Hungary

AUTHORS Lilla Sarolta Balogh Ferenc Bánhidi Anton Bendarzsevszkij Péter Bucsky Norbert Csizmadia Ráhel Czirják Viktor Eszterhai Balázs Forman László Gere Atilla Grandpierre László Jeney Péter Klemensits János Balázs Kocsis Dénes Komjáthy Fanni Maráczi György Matolcsy Eszter Monda Márton Péti Eszter Polyák Géza Salamin István Tózsa Gergely Tyukodi Ágnes Varga Alexandra Zoltai

DATE OF PUBLICATION Nov 2017

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An essential selection of

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(SCENARIOS OF THE FUTURE) George Friedman and György Matolcsy

“expect the unexpected” “see the events of the world through the eyes of decision-makers”

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2017

HUNGARIAN GEOPOLITICS HUNGARIA N G EOPOLITICS

HUNGARIAN GEOPOLITICS

HUG 2017