New fund finances modern Silk Road

China has established a fund to finance infrastructure projects along the land-based and maritime Silk Roads, a major step forward under a national strategy to revive the centuries-old trading routes connecting Asia and Europe.

President Xi Jinping said at a financial meeting of the central government on Thursday that the fund will be used to support building of infrastructure including transportation, utilities and telecommunications in countries along the Silk Road economic belt and maritime route.

The creation of the fund was seen by experts as a sign of China's ambition to seek further integration of the global economy and to use its financial strength to promote a well-built and connected Eurasian economic circle.

The initial capitalization of the fund is about $10 billion and will gradually expand to $50 billion without any maximum cap. It will be backed by the People's Bank of China, the Ministry of Finance and the country's development banks. More than half of the fund will come from China's foreign reserves, according to media reports.

Xi urged the drafting of a detailed timetable, road map and list of initial projects for the fund as soon as possible.

He emphasized that the projects must reap multilateral benefits and be committed to improving people's livelihoods in the region.

The establishment of the fund followed the creation in September of the Asian Infrastructure Investment Bank, the Beijing-based multilateral financial institution designed to finance infrastructure capabilities in the region.

Xi said that the relationship of that bank and the Silk Road fund with other global and regional financial institutions is complementary rather than mutually exclusive.

Economists said that the Silk Road fund signaled a shift in China's development strategy from focusing on attracting foreign investment to exporting capital and goods to foreign markets.

Chen Daofu, a researcher at the Development Research Center of the State Council, said the fund will help accelerate China's economic transition at home while creating a solid financial foundation to improve regional trade and investment.

"It opens new channels for China to address the problems exposed by its industries with excess capacity. It also brings new markets for its goods and capital," he said.

Construction, equipment manufacturing, utilities, high-speed railway, oil and energy are expected to substantially benefit from the fund.

Xi first raised the new Silk Road plan during visits to Kazakhstan and Indonesia last year. It comprises a land-based economic belt starting from China's ancient capital of Xi'an through Urumqi and stretching to Central Asia, the Middle East and Europe and a maritime route that goes from China's southernmost provinces via the Strait of Malacca and reaches the Horn of Africa before entering the Red Sea and Mediterranean.

"It is a bold idea and gives strong narrative to the relations between China and the inner Asia, the Middle East and the Central European area. These are crucial spaces for China to build political and economic links," said Kerry Brown, executive director of the China Studies Center at the University of Sydney.

It opens new channels for China to address the problems exposed by its industries with excess capacity."