China's financial innovations inspiring

We are living in an era of great transitions, with rapid changes catalyzing and multiplying each other on an unprecedented scale. Apart from the usual pattern of business cycle and geopolitical transitions, there are also new challenges and uncertain pathways. Most of them are related to the rise of artificial intelligence and the pressing issue of climate change.

The digital and green transformation are therefore not simply two processes shaping our daily lives, but two megatrends transforming economics, geopolitics and international relations. In a world like this, maintaining financial stability must remain a top priority as a well-functioning financial system is crucial for channeling funds toward future industries.

Our decade so far is characterized by "the re-rise of geopolitics", including heightened trade tensions, fierce competition in high-tech and a race for new types of resources. The emerging economies in Asia, especially China, are playing a vital role on the global stage and their quick growth has strengthened the voice of the Global South, ushering in a new multipolar world order.

The rise of Asia is underpinned by innovation, as several Asian countries are now at the forefront of developing new technologies. According to the Critical Technology Tracker compiled by the Australian Strategic Policy Institute, China is the leader in many high-tech segments, including AI, quantum computing, critical raw materials extraction and processing, drone technologies, and engine manufacturing. In addition, China is building a vast renewable energy supply network, which enhances its competitive edge in the overall transformation needed in the 21st century.

These developments have created new geopolitical challenges. Amid looming trade barriers, it is worth recalling how the multilateral trade system has facilitated global economic growth over the past decades. Taking into account the rise of the digital economy and the nature of AI-based services, retaining the open and free international setting would be in the best interest of all parties. Such an outcome is possible if countries reach an agreement at least on the rules of new-old phenomena such as onshoring, nearshoring, the rush for critical resources and the reemerging concept of economic security.

Likewise, open minds are necessary for rethinking the general frameworks for international dialogue and cooperation. While emphasis should be placed on win-win cooperation, mutual trust and respect for the reasonable interests of the other party, connectivity should be improved, in order to ensure much-needed stability. In this respect, intellectual networks play a crucial role and require a new international consensus, too.

The free flow of knowledge has become critical as global economic powerhouses capitalize on international expertise to scale up their enterprises and raise the living standards of the people. Countries should strike a long-term balance between justified interests in development and the need to find ways to enhance sustainability. By prioritizing cooperative policies, countries can navigate geopolitical tensions while ensuring long-term growth. A renewed focus on preserving and enhancing economic connections will be key to mitigating risks and ensuring cooperation remains a driver of global progress.

Despite the current challenges, however, the global financial outlook has been stable so far. China has introduced a series of measures to safeguard financial stability, with a view to maintaining necessary levels of liquidity in the financial system.

Moreover the Chinese government has pledged to make consumption the number one engine of growth. A significant rise in demand in China will inject new vitality into the global economy and benefit all players. On the other hand, financial innovation in China is gathering speed with digital payments, a widespread pilot of the central bank's digital currency (e-CNY), and green finance. This is a good example of how innovation in the financial sector, with the right supervision, can ensure the economy's long-term sustainability.

Although geopolitical tensions are rising, the efficient functioning of the global financial markets and the universal need to finance high-tech and green development can be regarded as a basis for constructive international engagement. The circular economy, the large networks of alternative energy supply, the electric vehicles, as well as conservation of biodiversity pose several challenges, but at the same time, offer concrete subjects for discussion. These topics have several well-defined aspects where agreements are both realistic and enforceable.

Besides governments, municipalities and corporations, central banks are also key players in facilitating cooperation. They can add immense value by helping every one identify hidden risks in the complex global financial network. In pursuing their mandates of price stability and financial stability, central banks can contribute to a viable model of international cooperation amid growing geopolitical tensions and rapid technological changes.

The views don't necessarily reflect those of China Daily.

The author is deputy governor of Magyar Nemzeti Bank.