 Witte underestimated Japan's growing economic and military power while exaggerating Russia's military prowess.Russia concluded an alliance with China (in 1896 by the Li–Lobanov Treaty), which led in 1898 to an occupation and administration (by Russian personnel and police) of the entire Liaodong Peninsula and to a fortification of the ice-free Port Arthur.Russia also established a bank and built the Chinese Eastern Railway, which was to cross northern Manchuria from west to east, linking Siberia with Vladivostok.