While the long-awaited and oft-postponed visit of the Chinese president, with happy tidings of funding a $ 46 billion dollar mega infrastructure cum energy project, is the main preoccupation of the media in Pakistan, the much broader implications of its economic underpinnings have received much less attention. China’s rise as a global economic power has a much deeper significance than the impact of the $ 46 billion it proposes to invest in Pakistan. While the figure may seem preposterous to some, in terms of actual foreign direct investment (FDI) flows into Pakistan estimated at less than one billion dollars, it is a small fraction of China’s official capital lending of over $ 670 billion in the last two years. It also pales into insignificance when compared to its four trillion dollars’ foreign exchange reserves or to its $ 17.6 trillion GDP in 2014, exceeding the US’s $ 17.4 trillion for the first time, to become the world’s largest economy. Some people are however unable to see the wood for the trees. Though not formally on the agenda, China’s ascendancy as the global economic and financial superpower, as epitomised by such overseas investments and, in particular, by the establishment of the Asian Infrastructure Bank (AIIB), is likely to overshadow all the other issues being deliberated by the official financial wizards at the ongoing spring meetings of the International Monetary Fund (IMF) and World Bank (WB) in Washington. Already, 56 countries have agreed to join the new multilateral development bank, which is likely to start functioning by mid-May, with its headquarters in Shanghai. With nearly four trillion dollars in foreign exchange reserves, China has plenty of resources to flex its burgeoning economic and financial sinews, even though it has always felt shy of doing so. Chinese President Xi Jinping’s recently concluded visit to Pakistan, delayed by over half a year because of internal turmoil, has finalised a $ 46 billion infrastructure investment that will open new transportation routes, not only within Pakistan but also across Asia and will unveil other vistas of regional economic cooperation in south and central Asia. In the last two years alone, Chinese state-run lenders have lent $ 670 billion. In contrast, the US Export-Import Bank has lent $ 590 billion since it was created during the Depression of the 1930s.It is not difficult to discern the mainsprings of the Chinese initiative. The lack of adequate reflection on the rapidly rising heft and gravitas in the world economy of China and other emerging economies in the current global financial structure that made it archaic and dysfunctional was one of the primary reasons that made the AIIB’s creation inevitable. The original Bretton Woods Agreement, signed seven decades ago, became unserviceable and finally came apart in 1971. Various piecemeal efforts to repair and overhaul these institutions came to naught as they failed to reflect the ground realities of global finance. Most recently, an attempt was made five years ago, in large part by President Obama, to give China and other emerging powers authority to moderately commensurate with their growing economic strength, but this has since languished in Congress. The resultant frustration prompted China, in concert with other emerging nations, to create their own multilateral lending institution in direct competition with the ageing behemoths in Washington that failed to serve the needs of emerging countries.In 2010, Obama brokered a deal to raise China’s stake in the IMF to six percent from 3.8 percent, still far below the US’ vetoing share of 16.5 percent — roughly equivalent to its share in total world income, which is now marginally lower than China’s. The US Congress has blocked even this modest adjustment. The establishment of a lending institution to cater exclusively to the long-neglected infrastructure needs of emerging countries, especially in Asia, was becoming an urgent necessity; the Asian Development Bank had estimated in 2009 that the region would need eight trillion dollars in infrastructure investment by 2020. It was not intended as defiance of or in the spirit of non-cooperation with the Bretton Woods institutions, in contrast with the behaviour of the communist bloc (of which China was then a part) during the Cold War when the latter boycotted, instead of building a consensus for substantive reforms in their functioning. In the present situation, the emerging powers — under China’s economic leadership — are building institutions tailored to their needs, rather than based on Washington’s perceptions. Indeed, it could be argued that the shoe is now in the other foot, as Washington unsuccessfully tries to keep its allies from joining the new infrastructure bank. In the process, the US has lost its role as the underwriter of the global economic system as well as its leadership role in world development. Realising its increasing isolation on the subject, the US has conditionally welcomed the establishment of the AIIB. Addressing the IMF-WB Spring 2015 meetings in Washington, US Treasury Secretary Jack Lew, declared: “We are ready to welcome new additions to the international development architecture, including the Asian Infrastructure Investment Bank, provided that these institutions complement existing international financial institutions, including by adopting their high quality standards. Having the AIIB co-finance projects with existing institutions will help demonstrate a commitment to these high standards.”Washington seems overly paranoid about fears of economic success fuelling China’s ambitions of world domination. Ever since China adopted its open door policy four decades ago, it has assiduously played by the rules and has hardly adopted an aggressive posture. It has moved up the steep learning curve of the games of international trade and finance with extreme caution, avoiding any missteps and has played its role with great finesse, unlike the Soviets. After spending the first three decades as a virtually closed economy, it opened up to the rest of the world and became the most successful exporter of manufacturing by attracting unprecedented levels of FDI. It rapidly upgraded the skills of its labour force and the quality of its indigenous manufacturing base. By running large trade surpluses with most of its trading partners, except oil exporting and some East Asian countries, it has continued to amass foreign exchange reserves that are now at a record level of four trillion dollars. This has created some unease in both the US and in China itself. The US is afraid that China may either carry out a massive sale of the US treasury bills it holds or rock the international monetary system by setting up institutions like the AIIB and BRICS bank to safeguard its massive foreign exchange reserves. However, this fear is largely unfounded. China poses no real threat to the global financial system but the US’s recalcitrance to reform the outmoded global financial architecture does.China’s initiative in deploying its massive accumulated foreign currency reserves — unlike the equally formidable reserves of major oil exporters accumulated since the 1970s that were recycled through commercial banks and resulted in the Latin American debt crisis — ensures that they are being put to good use through a multilateral institution. By building a network of much needed infrastructure projects in Asia, it is helping to integrate Asian economies and is enabling them to shed vestiges of the colonial legacy of backwardness. How successful this strategy will prove to be will largely depend on whether aid recipient countries will mobilise their own resources to foster inclusive and peaceful development rather than in the senseless pursuit of self-aggrandisement.President Xi’s historic visit to Pakistan has thrown a daunting challenge to the countries of South Asia to put their house into order individually and collectively to help realise the dream of an Asian century. If past experience is any guide, such a challenge is unlikely to be met any time soon. The writer is a freelance columnist. He can be reached at smnaseem@gmail.com