The Belt and Road: China's Ambitious Initiative

Dragana Mitrovic ［Serbia ］

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The Belt and Road: China's Ambitious Initiative

Dragana Mitrovic ［Serbia ］

The Belt and Road initiative refers to the land-based Silk Road Economic Belt and sea-based 21st Maritime Silk Road proposed by Chinese President Xi Jinping in 2013. During his state visit to Kazakhstan， in a speech at Nazarbayev University on September 7， 2013，President Xi proposed that China and Central Asia join hands to build a Silk Road economic belt to boost cooperation. The following month，on October 3， in his address to the Indonesian Parliament Xi proposed a 21st Century Maritime Silk Road as a new maritime silk road connecting China with the members of the Association of Southeast Asian Nations（ASEAN）， South Asian countries， Africa and Europe. On that occasion， he also announced the establishment of the Asian Infrastructure Investment Bank （AIIB） as a new financial tool to support regional interconnectivity and further economic integration through network infrastructure. The two new silk roads are a grand initiative to link China with South-East and South Asia， Eurasia， Africa， and Brazil through trade， investments， transport and energy infrastructure projects， tourism， education， culture and other areas of cooperation. The initiative is also seen as a development mega project for many of the countries along its network.

Major Domestic and External Goals

Having in mind numerous possible benefits for the Chinese economy andits political and social stability， and， more significantly， China's international role that could come as a result of the successful realization of many projects within the Belt and Road， the Chinese leadership has launched the initiative with significant resolve. Beyond huge investment in the building of road and railway infrastructure， seaports and airports， high-speed fiber optic networks， and energy pipelines， along with the establishment of regulations and trade logistics and coordinating institutions in the participant countries，the Belt and Road Initiative seeks to achieve policy coordination among the participating nations through intergovernmental cooperation， macropolicy coordination and new cooperative multilevel mechanisms among the participating nations.

The Belt and Road Initiative is complexly intertwined with a range of challenges facing China in its pursuit of sustainable economic growth， as the strategic benefits and potential gains for its economy represented by the Belt and Road are numerous. As China has been facing many problems while trying to transition to a new economic growth model， it is focused on primarily achieving the following goals: gaining access to resources and access to markets for final products， reducing or reallocating part of its industrial overcapacity and dirty industry， deleveraging some crucial sectors of the economy， and diversifying and safely and efficiently deploying its enormous $3.51 trillion foreign reserves.1Wei Lingling， “China's Foreign Exchange Reserves Drop $43.26 Billion in September，” The Wall Street Journal， October 7， 2015. Available at: http://www.wsj.com/articles/chinas-foreign-exchange-reservesdrop-43-26-billion-in-september-1444199770.By constructing or upgrading transport， energy and communication infrastructure along the Belt and Road， and connecting it with the existing infrastructure，to form a new， vibrant network， China is creating an opportunity to export technologies， creativity， management skills， as well as materials and labor，that will reduce the pressure of domestic overcapacity in sectors such as steel manufacturing， and cement， etc. and sustain its moderately high economic growth rate. It will also absorb and diversify China's financial surpluses and help it to increase its capitalization， as well as control the extensive domestic investment. To overcome the steady decline in its working-age population， andthe consequences of excessive domestic investment and over-reliance on export driven growth in past decades， economic structural reform has become an urgent issue for China.

The implementation of the Belt and Road Initiative will also promote the deepening of regional economic integration. This can be achieved through increasing cross-border trade， which can benefit from the construction of new infrastructure and simplified procedures for visas and procedures for cross-border trade， and from unified standards for trade and investment. For China that is the most productive way to exercise its growing potential as a rising power and better use its influence， especially as the United States' rebalancing to Asia has led to the United States strengthening its military and trade alliances in East Asia and the Pacific. Maritime and border issues in the South China Sea although demonstrating China's growing military strength and self-confidence have at the same time to a great extend been counterproductive with regard deepening mutual trust and good neighborly relations. During the last two decades， China has invested a lot in many aspects to build and strengthen trust and cooperation with all of its neighbors， but recently some of them （Indonesia， Philippines， and Thailand） have started to lean back toward the United States.

On the trade， production and technology levels， Washington has been pushing two economic initiatives on both fronts of its global dominance: across the Atlantic and across the Pacific， namely the Trans-Pacific Partnership（TPP） and the Transatlantic Trade and Investment Partnership （TTIP）， both of which exclude China. Certainly， containment of China's rise has so far proved to be unsuccessful， but it has pushed China towards its western geostrategic vector and perhaps reassured its leaders that “peaceful rise” and “win-win”economic cooperation are still better options than security and military pressure or confrontation. That is exactly why rising China is seeking to secure its geopolitical and security interests by tying other countries into very close and interdependent economic relations through the Belt and Road Initiative. Belt and Road projects will strengthen China's importance as an economic partner for its neighbors and increase its political and strategic power in the region， including its strong cultural influence. Increased investment in energy and mineralresources， particularly in Central Asia， could also help reduce China's reliance on commodities imported from overseas， including oil transiting through the Strait of Malacca， while providing energy security through diversification of geographic sources.

Serbian President Tomislav Nikolic receives an exclusive interview with Xinhua News Agency before Chinese President Xi's visit to Serbia.

When it comes to China's economy， whose new normal rate of GDP growth is less than 7 percent， the initiative's numerous projects within Chinese territory， including more highways， railways （such as the Chongqing-Xinjiang-Europe railway）， and airports will help support its further growth. Furthermore，it should contribute to further integration of domestic resources， transport infrastructure and inter-provincial economic policies and market unifications that will at the same time enable the various parts of China to connect with each other and with the outside economic surroundings more successfully. There are expectations that improving connectivity between its much less developed western provinces， for example with the high-speed railway between Urumqi and Lanzhou， as well as its southern and richer coastal areas with the countriesinvolved within the Belt and Road， China will improve its internal economic integration and competitiveness and spur more regionally balanced growth within its own territory. So far， China's largest overseas development-orientated package of investments， which also serves as the model for future Belt and Road projects， is the China-Pakistan Economic Corridor that connects Kashgar in the Xinjiang Uygur autonomous region with Pakistan's major deep-sea port， Gwadar. China is investing $46 billion into the Corridor， whose main goal is to upgrade Gwadar， which provides direct access to the Indian Ocean. The first investment by the newly established Silk Road Fund was $1.65 billion into the Karot hydropower plant that is aimed at helping Pakistan to upgrade its power supply，another huge project within the China-Pakistan Economic Corridor. Also，when investing or initiating investment into projects that improve infrastructure connectivity among countries， such as those in South Asia— India， Pakistan，Nepal， Bangladesh and Maldives， China has been creating new markets for its exports and new destinations for its investments and tourists.

China plans to use existing and newly established industrial parks， special economic zones and recently expanded surroundings （Shenzhen， Zhuhai and others in Perl River Delta）， highly developed ports （such as Ningbo and its Port Economic Circle2“Ningbo plans for Belt and Road construction，” China Daily， November 23， 2015， p. 10.）， and trade and financial superpowers in its neighborhood，such as the Hong Kong Special Administrative Region and Singapore. Singapore and Hong Kong have big roles to play in providing financing for related projects， as financial entities such as sovereign funds， private equity and commercial banks located in their markets are expected to participate. Hong Kong is already an offshore yuan centre and seen as a location for an AIIB branch office， but it is also seen as more directly connected with several mainland centers of Belt and Road projects， especially those within the Guangdong Free Trade Zone when it comes to financial networking.3Romman， Alfred， “Initiative promises business bonanza，” China Daily Asia Weekly， November 20-26，2015， p. 11.One of the new decisions in this direction was the formation of several free trade zones in the locations of established and “open” fast-developing entities: NanshaNew Area in Guangzhou， Shenzhen Qianhai and Zhuhai Hengqin New Area，the Tianjin Free Trade Zone， Fujian Free Trade Zone， including SEZ Xiamen and Pingtan， a new industrial park， as well as expending the new Shanghai Free Trade Zone4Decision made on December 28， 2014 by the Standing Committee of the National People's Congress - More available at: http://www.china-briefing.com/news/2015/01/06/china-rolls-new-ftzs-expands-currentone.html#sthash.EMisu3um.dpuf.that should intensify its financial， logistic， seaport and other services to support Belt and Road projects in advanced ways.

Another expectation is that the huge investments to be made in transport and communication infrastructure along the Belt and Road routes will， in turn， raise the demand for steel， cement， petrochemicals， telecommunication equipment， etc. whose demand has been shrinking in China in the last few years due to overcapacity， causing the Chinese economy to contract. Promoting investments into Belt and Road projects will create demand and new opportunities and markets for Chinese enterprises， which will have a multiplier effect on the production of goods and services in China. At this point，most of the Belt and Road infrastructure projects will be funded by China and institutions supported by China， so such demand will go to Chinese companies primarily， although it is expected that other participating nations will seek and get more room for the involvement of their own enterprises.

China also needs to transition to sustainable growth by expanding its foreign investments， while curbing excessive domestic investment and by promoting Chinese companies' economic activities in overseas markets.5China's share of global foreign direct investment has been increasing steadily during the last decade，rising from 1.2% in 2007 to 7.2% in 2013. Please consult: http://www.nippon.com/en/currents/d00178/.China's big State-owned corporations are certain to take dominant positions in the realization of the Belt and Road infrastructure projects， followed by smaller State-owned and private companies. Although the Belt and Road should not be simplified and seen as a gigantic and daring attempt by China to “export”its model of rapid development through giant infrastructure projects and intra-regional and intercontinental investments， so as to save its own growth during the implementation of structural reforms， the initiative certainly has these elements and goals， too. By integrating its domestic infrastructure intosimilar projects within the Belt and Road， China will maintain a sufficient level of investment to provide enough time for consumption， the third and still underdeveloped growth engine， to catch up. Foreign trade， as the second one， would also have enough space to keep growing， while its contribution to China's GDP would relatively decrease.

When it comes to domestic security in China， the Belt and Road projects offer a good opportunity for the central government to intensify its policy of economically upgrading the Xinjiang Uyghur autonomous region， the source of the country's secessionist and terrorist threats. Xinjiang， which has borders with Mongolia， Russia， Kazakhstan， Kyrgyzstan， Tajikistan， Afghanistan， Pakistan and India， is strategically important for the infrastructure network of the Belt and Road， as transport links should pass through the region and connect China with its neighbors. Central Asian countries will be connected with western China through Xinjiang as the gateway， and its position has already been proved with several infrastructure and investment projects. Also， initiatives for investing in Xinjiang's banking sector， manufacturing， tourism， transportation and commercial hubs and other sectors will provide employment for local residents and stimulate growth of the region's economy and promote general well-being，which are also part of the Belt and Road goals.

Urumqi， the regional capital， is seen as a center for regional transportation，commercial logistics， financial services， culture， technology and medical services，and it has already invested $113 billion in building industrial bases for the high-tech industry， cloud computing services， tourism and trade， including the construction of a new railway station. The city's high-tech industrial zone has already attracted 3，600 companies， including Coca Cola， SK Mobile and Carlsberg. At the same time， the strategy “going out and bringing in” has been introduced and companies from Urumqi have invested $1.7 billion in neighboring economies， including Tajikistan's and Kazakhstan's.6Liu Jing & Cui Jia， “Urumqi supports trade initiative，” China Daily， October 16， 2015， p. 5.The Bank of China and the four other largest State-owned commercial banks， that provide financial services in the China-Kazakhstan Horgos International BorderCooperation Centre in Horgos， a city in the Ili Kazakh prefecture， financed companies with $1.1 billion in 2014. The same year， trade in Xinjiang amounted to $27.67 billion， of which trade between China and neighboring countries accounted for 74 percent.7Jiang Xueqing， “BOC expands facilities in Xinjiang for Belt and Road opportunities，” China Daily，September 29， 2015.China has been relying on the positive effects that economic development， rising employment， more public goods and poverty elimination have on ethnic issues and the political dissatisfaction of local Uyghurs. By doing so， China will not only increase its own domestic security but also contribute to regional security efforts.

Opportunities and Challenges for Implementation of the Belt and Road

The “Belt and Road” Initiative has already proved to be on an inclusive basis， with flexible geographic scope. Some of the included countries were on the map from the first blueprint； others have been incorporated later，due to the exploration of plans and routes， or due to their own proactive positioning toward the initiative. In that sense， Mongolia's role in Belt and Road-related projects was agreed in 2014 after intense lobbying by Ulaanbaatar and further explored at the second trilateral meeting of Russia，China and Mongolia， in Ufa， Russia， on July 10， 2015， prior to the BRICS and Shanghai Cooperation Organization （SCO） conferences. President Xi suggested that the three countries would connect the Silk Road Economic Belt to Mongolia's Prairie Road strategy and with the planned Russian rail network （Trans-Eurasian Belt Development）. The Belt and Road's connection to the Mongolian region will come via the building of a China-Russia-Mongolia economic corridor and tangible cooperation projects，including railways， roads， energy resources， logistics， transportation and agriculture started in 2015. The first two pilot projects connect Erenhot with Manzhouli in the Inner Mongolian autonomous region and Eastern Russia and the second involves constructing a trade cooperation zoneat the Erenhot—Zamiin Uud （Mongolia） border. The aim is to develop traditional trade， processing trade and e-commerce through improving traffic interconnectivity and facilitating cargo clearance and transportation. The next stage will be the special logistic program “Mongolia-Russia Connect.”8Mongolia's Place in China's ‘One Belt， One Road'， Publication: China Brief Volume: 15 Issue: 16， The Jamestown Foundation August 18， 2015.As proved with Mongolian involvement， there will be more and more room for the involvement of active and vigorous participants — both countries and enterprises. The Belt and Road Initiative should continue remain inclusive as more detailed plans and projects develop along the road so as to prove its initial spirit and agenda.

For some analysts an obstacle to the Belt and Road has been its possible competing goals with simultaneous or geographically overlapping initiatives or projects initiated by other countries or regional organizations. They suggest that special flexibility and attention is required in dealing with the issues of how much the Belt and Road will overlap with or compete with other strategic projects and initiatives—including SCO projects and initiatives， the Eurasian Economic Union and its Eurasian Development Bank （EDB）9The EDB was established in 2006 by the Russian Federation and Kazakhstan， while the Republic of Armenia and the Republic of Tajikistan， the Republic of Belarus and the Kyrgyz Republic became full members of the Bank in 2009， 2010 and 2011 respectively. Its aim is to promote economic growth in its member states， extend trade and economic ties between them and to support integration in Eurasia. The Bank has provided financing totaling more than $5.3 billion to investment projects in its member states. Available at: http://www.eurasianet.org/node/72701.initiated by Russia， as well as initiatives in the Central Asia of the Asian Development Bank （ADB）， the European Union's， India's， Japan's and the United States' initiatives in the Central Asia， the projects of the Conference on Interaction and Confidence Building Measures in Asia （CICA） and the BRICS New Development Bank， among others， including China's own initiatives， some of which are: China's construction or bidding for construction of overseas high-speed railways from such as those in Russia to and Indonesia， the Bangladesh-China-India-Myanmar Economic Corridor and the China-Pakistan Economic Corridor. As shown with the latter，such projects become or tend to become， whether as planned or unplanned，part of the Belt and Road， while interested countries have inclined to becomepart of the Belt and Road initiative with their own projects， as has happened with Russia and India. During his visit to Russia on May 9， 2015， for the celebrations to mark the 70th anniversary of victory in The Great Patriotic War，President Xi Jinping announced a dialogue mechanism for integrating the Belt and Road and the Eurasian Economic Union （EAEU）， indicating the Shanghai Cooperation Organization SCO would be the body for coordination between the two initiatives. Russian President Putin announced that the two countries had decided to “create a common economic space” in Eurasia and reach a “new level of partnership，” in which Russia will get access to resources from the Silk Road Construction Fund to develop its agriculture， while China will get a reliable transit point to Europe. Some analysts saw this as an end to Russia's ambiguity about China's Belt and Road Initiative. After visiting Russia， Xi visited the other two members of the EAEU—Belarus and Kazakhstan—to add more vitality into the announced projects. By having the Russian Federation and EAEU integrated， the Belt and Road has more viability as China and Russia have agreed to cooperate in the stable development and regional economic integration of the Eurasian region as a whole and to “safeguard peace and stability on the Eurasian landmass.”10Tian Shaohui， “China， Russia agree to integrate Belt initiative with EAEU construction，” May 9， 2015，http://news.xinhuanet.com/english/2015-05/09/c_134222936.htm.

Over time it has became obvious that Chinese embassies' and corporations' public relations significantly influence general public opinion toward Chinabuilt or financed projects around the globe， of which some have had been perceived negatively. That is why it is of special importance that in the countries along the Belt and Road， before the decision-making process about Belt and Road projects even begins， making and obtaining the support of the public， as well as the local business community's community， based on their awareness of expected gains and a transparent process， is necessary. Besides seeking to ensure mutual benefits， a lot of work needs to be done， both bilaterally and multilaterally， regarding the necessary harmonization of customs， financial standards and regulations， adjusting and most likely the lowering of tariff and non-tariff barriers， trade and investment facilitation， etc. Cooperation in dealingwith complex and sensitive visa facilitation procedures will be necessary. The legal framework should also be considered to help promote tourism， education and common R&D projects， cultural exchanges and similar programs that can deepen integration and bolster social and cultural interaction on the people-topeople level as such cooperation can cement long-lasting bilateral and multilateral cooperation.

The approach which China takes to infrastructure development management along the announced routes is very of significant to the Belt and Road， but the way they are financed is especially sensitive， and rings potentially big risks for China. Some of the countries participating in the Belt and Road network of projects suffer from a large fiscal deficit and/or current account deficits. Providing these economies with investment capital or investing in their relevant economies presents risks for China. Some analysts equally worry about the possible risks for to the Chinese financial system stemming from the wider internationalization of the renminbi. On November 13， 2015 the International Monetary Fund （IMF） decided to include the renminbi in its Special Drawing Rights DR basket as of October 1， 2016.11Review of the Special Drawing Right （SDR） Currency Basket， International Monetary Fund， November 30， 2015.Prior to the decision，China pushed hard for this to happen， and given the size and influence of its economy today it sounds reasonable. But， before including the renminbi into the SDR， the IMF had to determine that it was “freely usable” and so it asked the People's Bank of China （PBOC） to make changes to its currency regime，although it is obvious that renminbi is still far from being freely usable. Also，China is obliged to tie the renminbi exchange rate at the start of daily trading to the previous day's close， unlike what the PBOC has been doing， which often created a big gap with the value at which it was last traded. It was the elimination of this gap that lay behind the renminbi's 2 percent depreciation in August that shocked the global markets， and the PBOC has intervened since August to support its value. China's foreign-exchange reserves reduction from a nearly $4 trillion in 2014 to just over $3.5 trillion in late 2015 reflects in part the PBOC's selling of dollars to support the renminbi. Were it not for tightercapital controls since the summer of 2015， the outflows might have been even bigger.12“The yuan joins the SDR - Maiden voyage: Reserve-currency status might make for a weaker yuan，”The Economist， Dec 5th， 2015.But the costs of such intervention will be greater given the new status of renminbi， while the PBOC must spend real money during the trading day to guide the yuan to its desired level.

On the other hand， any effect on China's economy is likely to be limited: except for China's pride and the political gain for succeeding in getting into the exclusive list of countries with a reserve currency. But it could add more severe pressure and costs on fragile new balances in the domestic economy， especially the financial sector. For a start， the PBOC will be under more pressure to manage the renminbi as central banks do in most developed economies； that is by letting market forces determine the value of their currencies. Also， if China maintains its de facto peg to the dollar it will boost the US dollar's weight in the basket and continue the overvalued level of the renminbi. In spite of the slowing of China's economy， the renminbi's peg to the surging dollar has pushed it up more than 13 percent in the past 18 months， which means that with the promised weaker intervention， the renminbi is set to succumb to the expected downward pressures and further depreciate. On the Chinese side， this may also be seen as a move toward a bigger say within the IMF's mechanism of dominance over the international monetary system.

Some analysts argue that the Belt and Road should be used as an excellent opportunity for China to further promote internationalization of the renminbi.13According to the Society for Worldwide Interbank Financial Telecommunication the renminbi yuan's share of international payments has risen from 0.6% at the end of 2012 to 2.2% at the end of 2014.Intense and over-accumulation of foreign exchange reserves in major global currencies， mostly and dominantly US dollars， but also euros and yen， is seen by those analysts as a big strategic mistake that has led to huge losses， although other options remained questionable considering the need to counterbalance its enormous current account surpluses. They point out that the 2008 global financial and economic crises taught China a bitter lesson on interdependency and dependency on other countries and that at that point itwould be much safer and wiser for China to deploy the assets in renminbidenominated investments.

Financing the Belt and Road

Up to now China used has to provided financial assistance through its development banks， such as the EXIM Bank （Export-Import Bank of China） to countries or regions in need of infrastructure investment （such as South-Eastern Europe and， Sub-Saharan Africa）， but that has usually led to Chinese State-owned enterprises becoming the major companies involved in the building financed projects. The perceived dominance of Chinese companies in winning infrastructure contracts on the back of these loans has led to accusations by the European Union that it is sidestepping the bidding processes through political decisions made at the top level.

Parallel to the promotion of the Belt and Road， China has also been working to develop a system of financial institutions which can offer financial support for the Belt and Road projects， while at the same time providing opportunities for foreign and private investors to take part in the established network of financing. It seems that China will try to skip some of the previous less successful and not well received patterns of financing business operations abroad and introduce several new models.

The Silk Road Fund Co Ltd.， set up in December 2014 and announced a month earlier， has a special place in financing Belt and Road projects. On November 4， 2014， at the APEC conference in Beijing， China's president President Xi Jinping announced the plan to launch the fund with $40 billion and welcomed other investors to contribute to the financial institution tailored to the Belt and Road. “The Silk Road Fund will be open ... and the fund's managers will welcome investors from Asia and beyond to actively take part.”14http://english.caixin.com/2014-12-03/100758419.html.The State Council will forward the nation's foreign currency reserves for about 65 percent of the Silk Road Fund's initial amount. The rest of the Fund's assetswill come from the government's sovereign wealth fund， China Investment Corp.， and the two policy banks， the Export-Import Bank of China and China Development Bank Capital Co. （CDB）. CITIC's contribution will be 15 percent， while the two banks will contribute 15 percent and 5 percent，respectively. Future investments may be ordered if needed， according to the State Council sources. It is equity investment where the Belt and Road Initiative and Silk Road Fund will be innovative by involving According to China Central Bank Governor Zhou Xiaochuan， the Silk Road Fund could become a model of public-private cooperation， operating like a private equity fund but with a longer investment prospect， and public and private investors，as well as international organizations， old and new， such as ADB and AIIB， as well as private corporations.

At the ASEM Industrial Dialogue meeting held in May 2015， Chinese Vice-Premier Zhang Gaoli announced that six economic corridors with countries along the Belt and Road's trade routes connecting Asia and Europe will be funded by the Asian Infrastructure Investment Bank and the Silk Road Fund and Chinese banks and corporations， as well as by other interested investors. The planned corridors are China-Mongolia-Russia， the New Eurasian Land Bridge，China-Central and West Asia， China-Indo-China Peninsula， China-Pakistan，and Bangladesh-China-India-Myanmar.15http://www.telegraph.co.uk/sponsored/china-watch/business/11663881/china-bi11ion-doIlar-belt-roadinitiatve.html.Meanwhile， the China Development Bank announced that it would invest some $890 billion into more than 900 projects in 60 countries， as part of its efforts to bolster the Belt and Road.16http://usa.chinadaily.corn.cn/business/2015-05/28/content_20845687.html.So far， according to CDB's vice-president Li Jiping， over $10 billion has already been invested into coal and gas projects， mining， electricity， telecommunications，infrastructure， agriculture， etc.

That way， the Silk Road Fund projects within the Belt and Road initiative， become one of the several major investment initiatives of China. These projects will increase the number of multi-billion dollar projects financed by China in recent years. According to OECD data， the biggestimpact of Chinese investment has been in Africa where its foreign investment has amounted to nearly $51 billion a year since 2007. In proportion to the size of the economy， Chinese direct investment in Africa has been five times larger than in the rest of the world.17Dragana Mitrovic， “China in the Western East and Beyond: Politics and Economics of the China Plus Sixteen Cooperation Framework，” Serbian Political Thought， 2/2014， IPS， Belgrade， ISSN 1450-5460，UDK 32. Year VI Vol. 10， （2014）， pp. 19-51.

Repeating the same pattern that China has used to strengthen its impact in its near neighborhood， in Africa and Latin America， and even with the United States， China has moved towards multiplying and strengthening its presence in Europe. Since the outbreak of the global crisis， Mediterranean，Central， Eastern and South European countries especially have become very attractive to Chinese business community， supported by the government. In April 2012， Chinese Premier Wen Jiabao met high envoys from sixteen Central and South-East European countries at the economic forum in Warsaw （announced a year before in Budapest） and introduced 12 measures for development within the new “16 + 1” framework. Some of the measures included a credit line worth $10 billion for support of the future projects， of which some 30 percent would be financed under the preferential conditions for developing countries. Projects in the area of infrastructure， high-technology，renewable energy are to be prioritized， while China will try to stimulate “16 + 1” trade so it doubles in value to $100 billion by 2015 and build one economic development high-tech zone in each of the 16 countries in the following five years， etc. Under this framework， Serbia is strategically positioned as an investment destination， and it has attracted some $1.6 billion of preferential loans. Projects financed in this way include a bridge over the Danube in Belgrade， the two-phased revitalization of the “Kostolac B” thermo power plant in city of Kostolac， including building a new plant， as well as $303 million for the two parts of the planned high-way construction for the Belgrade-Adriatic coast corridor.18Ibid.， p. 26.The introduced pattern was that China's EXIM bank issued preferential loans for 85 percent of the projects with the rest investmentby the Republic of Serbia. The projects are mainly being done by Chinese corporations. Special attention has been given to the modernization of the Belgrade-Budapest railway， as it was announced as a tri-party deal during the second China-CEECs Summit， in Bucharest on November 25， 2013. Chinese Premier Li Keqiang announced that his country has reached an agreement with Hungary and Serbia to jointly build expand and modernize a railway between the two countries and that was confirmed at the third China-CEECs Summit in Belgrade.

On November 26， 2015 President Xi held a group meeting with leaders of the sixteen 16 Central and Eastern European countries （CEECs）， as part of the fourth China-CEECs Summit. On that occasion， Chinese President Xi Jinping and President Andrzej Duda of Poland， Prime Minister Aleksandar Vucic of Serbia， Prime Minister Bohuslav Sobotka of the Czech Republic，Prime Minister Boiko Borisov of Bulgaria and Deputy Prime Minister ?ubomír Vá?ny of Slovakia signed intergovernmental memorandums of understanding on jointly constructing the Belt and Road between China and the five countries.19“Xi Jinping Holds Group Meeting with CEEC Leaders Attending 4th Summit of China and CEEC，”MOFA， 2015/11/26； Available at: http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1319541.shtml.Hungary was the first country to sign a memorandum of understanding with China on promoting the Belt and Road Initiative.20Tiezzi， Shannon， “China's Silk Road in Europe: Not Just Hungary，” The Diplomat， June 9， 2015，Available at: http://thediplomat.com/2015/06/chinas-silk-road-in-europe-not-just-hungary/.At the“16+1” summit in Suzhou in November 2015 held under the theme “New beginning， new domains and new vision，” Chinese Premier Li Keqiang set out a new vision for deepening and expanding China's cooperation with the 16 countries of Central and Eastern Europe through the “One goal and six priorities” agenda.

From June 17 to 22， 2016， Chinese president Xi Jinping visited Serbia，Poland and Uzbekistan to build new momentum for the Belt and Road Initiative. His attendance at the 16th meeting of the Council of Heads of State of the SCO in Tashkent， Uzbekistan， on June 22-24， 2016， also boosted the development of the SCO. This came three months after his visit to the CzechRepublic， another Central European country in March 2016.

China and Serbia， as well as China and Poland， both of which are strategically located， agreed to upgrade their strategic partnership to a comprehensive strategic partnership. President Xi's visit was aimed at further promoting political ties with Serbia and Poland， improving the arrangement of their respective development strategies and at reaffirming the commitments made for Belt and Road projects. In Serbia， which hosted a Chinese president for the first time in 32 years， the Serbian and Chinese leaders signed 22 cooperation deals， while bilateral cooperation in industrial capacity， finance，infrastructure construction， trade， energy， telecommunications， science and technology， culture and tourism were specifically highlighted in the official statement.

One of the focus points of the visit was exposed revealed at the ceremony in the Serbia's Smederevo Still Milll， recently taken over by China's steel giant HeSteel Group （HBIS）. Poland has been an active participant in the “16+1”initiative， as direct cargo trains from Poland's city of Lodz and Warsaw to China's Chengdu and Suzhou prove. Ahead of the visit， the first by a Chinese president in 12 years， President Xi called for Chinese investment into Poland's nuclear energy sector.

In June 2015 Chinese state-owned conglomerate CITIC Ltd. announced that it will invest up to $113 billion in the Belt and Road Initiative. The money will come from its banking， securities， trust， and construction divisions， and will be put toward the completion of approximately 300 projects from Singapore to Turkmenistan.21http://www.reuters.com/article/20l5/06/24/china-citic-investments-idUSL3NOZA3AH20150624.CITIC's banking subsidiary， China CITIC Bank Corp.，will contribute $65 billion. The money will be disseminated through its local branches and help fund more than 200 projects in infrastructure， energy， and agriculture. CITIC's securities， trust， and construction divisions will contribute the rest of the funds as equity and debt financing to more than 30 countries supported by the initiative.

Other funds are still under preparation and will be released later，accordingly to the agreed projects. One of them should be oriented to Chinese-Arab cooperation with financing from CDB and the Abu Dhabi Investment Authority， a sovereign wealth fund in the United Arab Emirates.22http://english.caixin.com/2014-12-03/100758419.html.A parallel point could be made regarding the $46 billion loan package that China gave to Pakistan in April 2015， as part of the leading acts to pave the way for the Belt and Road initiative. According to Chinese analysts， numerous initiatives show China's efforts to expand outbound investment and enhance Beijing's global influence.

One of China's greatest successes and strategic wins ever in the international arena happened in Beijing on Monday， June 29， 2015 when delegates from 57 countries signed an on to establish the AIIB. Of them， 37 were from the Asia Pacific， while the other 20 came from Europe， Africa， the Middle East and Latin America. Fourteen of them are EU member states， showing again the absence of a unified EU stance on a huge international issue. The AIIB will begin with authorized capital of $50 billion， which will eventually be raised to $100 billion. Asian countries are expected to own up to 75 percent of the bank while other nations will own the remainder. Each Asian member will then be allotted a share of that 75 percent quota based on their economic size. China will hold a 25-30 percent stake， while India will be the second-biggest stakeholder with 10-15 percent. Germany plans to hold a 4.1 percent stake to become the fourthbiggest member after Russia， according to sources close to the AIIB organizers. In June 2015， Australia announced that it would contribute 930 million Australian dollars （$719.36 million） over five years to become the institution's sixth-largest shareholder.

In recent decades， huge dissatisfaction with the results and manner of functioning and managing of the International Bank for Reconstruction and Development （IBRD）， IMF， ADB—in which officials， interests and voting power from the economically most developed countries from the North dominate— has been growing in the countries whose economies have been devastated by the enforced neo-liberal recommendations/ultimatums of theformer.

During the Asian economic crisis and the recent financial and economic crisis， these institutions showed their deep and dangerous lack of knowledge，liquidity and responsibility， and were even capitalized by some of the emerging economies， such as China and India. At the same time， emerging economies initiated a set of actions toward internal reforms of the Bretton Woods institutions that would recognize the new reality in the international political arena， which would mean stronger voting power， at first for the BRICS countries，and than the other emerging economies， based on their new economic power. Nevertheless， changes in the voting power have been developing too slowly because of political resistance， primarily in the US Congress. Also， changes of the leading figures， which， according to the imperial mechanism are shared between the United States and Western Europe in the IBRD and IMF， and Japan in ADB，seem to never happen.

Establishing the AIIB is part of the attempt by China， Russia and the other BRICS countries， as well as numerous emerging economies， to change the existing order by taking pieces of the global power cake from the United States， the European Union， and global financial oligarchy， represented by dominant international financial institutions and politicians in many Western countries. BRICS and other emerging economies get their “relational power”from their relevant positions as big regional or global importers or exporters，and traders of scarce resources， such as oil， gas or rare earths， etc. But， what is even more important and new in this process is with the founding the AIIB they acquire more important “structural power”—power that is based on system building， controlling， and rule-making by the founders， rules that by definition，should give the biggest gain to them. By founding this new institution they put themselves into a position to influence the functioning of the global and international financial system. China's role has been particularly significant in this， if not crucial.

The AIIB should address one of the key problems in Asia: the lack of all sorts of infrastructure. The ADB estimated that about around $8 trillion needed to be invested in infrastructure in Asia by 2020. The Belt and Road initiativecreates a vast playing field and obvious and attractive investment destinations. Whether the AIIB becomes an effective mechanism to support only high-quality and sustainable projects is of crucial importance for its future development.

New Role of a Rising China

The success of the Belt and Road Initiative will very much depend upon China's ability to truly include local stakeholders. Only if properly dealt with，will the network of trade， communication and energy across Eurasia， Africa and the Middle East provide the opportunities to boost economic growth，social development and interconnections and deepen political relations.23http://www.bmiresearch.com/news-and-views/chinas-one-belt-one-road-initiative-transparency-andinclusiveness-key.It could even substantially change the global logistics. If China， as expected and announced， encourages inclusion， equal possibilities for all the stakeholders，abides by dominant and agreed legal norms and rules， the Belt and Road will give very positive impetus to global markets and efficient allocation of capital investments. It will create unprecedented opportunities in direct investments and waken up sleepy markets.

The Belt and Road Initiative underlines China's daring and powerful bid to have a bigger say in global economic and political affairs and shows the way it would like increase its influence in shaping the world's and China's own future. This is the one of the two most impressive initiatives of China so far. It is also enforcement of the leadership's policies of “reclaiming national pride and enhancing personal well-being” while realizing the Chinese dream. Many consider the Belt and Road Initiative as the next phase of the China's reform and opening up policy， following the previous “Go Global” （Zouchuqu）strategy in 2011.24EIRM， The New Silk Road Becomes the World Land-Bridge， Leesburg， 2015.But， whether there is enough strategic creativity and strategic strength on the side of the initiator—rising China—and enough tolerance and pragmatism on the side of the descending hegemon， the United States， is yet to be seen.

Dragana Mitrovic， PhD， is a full professor of Political Economy and Modern China Studies at the Faculty of Political Sciences， University of Belgrade and Director of the Institute for Asian Studies.