Many Asians believe that the region's dramatic economic rise over the past several decades has not been reflected in global financial institutions. The international financial power centers are American and European, but that supremacy is about to be challenged by China's initiative in establishing the Asian Infrastructure Investment Bank (AIIB), which will be headquartered in Beijing.

The AIIB was created in October 2014 by 21 countries, led by China. Officials in attendance unanimously approved Chinese Deputy Finance Minister Jin Liqun as secretary-general of the Multilateral Interim Secretariat for Establishing the Asian Infrastructure Investment Bank.

By April 15 the total number of AIIB prospective founder nations now stands at 57, including four of the five United Nations Security Council members, 14 of the 28 European Union nations and 21 members of the 34-strong Organization for Economic Cooperation and Development (OECD). Founding members have the right to make rules for the bank while countries that applied to join after March 31 will be ordinary members with voting rights only, and less say in the rule-making process.

The AIIB will give China's economy a greater role in shaping global economic governance at the expense of the United States and the international financial institutions it has dominated since World War Two, the World Bank and the International Monetary Fund (IMF). Besides the IMF and World Bank, the AIIB will be a competitor with the Asia Development Bank (ADB), founded in 1966 under the aegis of the World Bank. The Chinese economy, now the second largest in the world, accounts for one fourth of the Asia-Pacific economy and the Chinese yuan has now become the second most commonly used currency in foreign trade after the U.S. dollar.

The US considers the AIIB a rival to the Western-dominated World Bank, IMF and ADB and has questioned future AIIB governance standards while seeing the AIIB as an attempt to spread China's "soft power." By urging allies to shun the AIIB, the U.S. has turned a regional development bank into a test case for its global influence.

China's reluctance to work through the Western dominated existing financial system has been fueled by Washington's failure to reform the 1944 Bretton Woods agreements that established the IMF and International Bank for Reconstruction and Development (now the World Bank) to reflect adequately the growing power of Asia's emerging economies. Through post-war gentlemen's agreements, the World Bank presidency was traditionally American, the IMF would be headed by a European and the ADB's presidency was reserved for Japan.

A major impetus behind China's initiative was that the U.S. Congress has yet to ratify a 2010 agreement to increase China's voting share and those of other emerging economies in the IMF. In October 2013 President Xi Jinping subsequently made a proposal to establish the AIIB during a visit to Southeast Asia.

The rationale behind the AIIB's formation is that focused, market-driven investment will support Asian countries' infrastructure construction to propel economic growth. Chinese officials say the AIIB's operations and governance will be open, transparent, inclusive and responsible. Chinese Foreign Ministry spokesman Hong Lei commented, "It will draw on the experience from other multilateral development banks and avoid their detours so as to be more cost-effective and efficient." He added that the AIIB "will complement existing multilateral development banks and support the infrastructure and economic development in Asia," with the AIIB's initial priority being infrastructure investment. ADB statistics underline the need for infrastructure funding, estimating that up to 2020, roughly $8 trillion of investment will be needed in the Asia-Pacific region to improve its infrastructure.

Initial seed capital for the AIIB is planned at $100 billion, with the Chinese government providing the initial $50 billion and the bank set to start operations by the end of 2015. Not only are AIIB charter members are seeking to invest startup capital, but other nations beyond Asia. Despite the fact that non-Asian countries will only be allowed to hold 25 percent of the AIIB's shareholding, on March 12 Britain applied to become the first Western founding member in the AIIB.

The AIIB will be in a strong position to challenge the dominance of the IMF, World Bank and ADB – in 2014, the IMF, which holds about $800 billion in its coffers, had $75.3 billion in outstanding loans, the World Bank – $65.6 billion, and the ADB – $21 billion. Unlike the IMF and World Bank, where the U.S. has not only a dominant role but veto power, in the AIIB all nations will instead participate in the decision-making process, according to Multilateral Interim Secretariat secretary-general Jin. Bowing to the inevitable, on March 22 IMF Managing Director Christine Lagarde at a financial conference in Beijing said that the fund would be "delighted" to cooperate with the AIIB, as did ADB officials as well.

Alarm bells have belatedly begun to ring in Washington, where in private, senior U.S. officials acknowledge that Washington's objections to the AIIB are about power. On March 17 Secretary of the Treasury Jack Lew testified to the House Financial Services Committee about the importance of the IMF and the World Bank to U.S. economic and political influence worldwide, urging Congress to approve a reform bill or risk losing "international credibility and influence," commenting, "Our investments in these institutions promote our strategic interests and international stability. Every dollar of our participation leverages four more from other member countries." Lew added, "It's not an accident that emerging economies are looking at other places because they are frustrated that, frankly, the United States has stalled a very mild and reasonable set of reforms in the IMF."

A more candid assessment was offered by China's state-run Xinhua news agency, which noted in an editorial, "The joining of Germany, France, Italy as well as Britain, the AIIB's maiden G7 member and a seasoned ally, has opened a decisive crack in the anti-AIIB front forged by America." Pulling no punches, The People's Daily in a front-page commentary noted, "The U.S. has been urging China to take on a more leadership role... When China proposed the establishment of the bank to take on more responsibilities, Washington is trying to stop it. This is short-sighted and hypocritical."

As the U.S. Congress dawdles over long overdue legislation to reform the IMF and World Bank, requests for membership in the AIIB can only increase as a result. As of last count, only Japan among America's allies has deferred joining the AIIB, hardly a diplomatic victory for Washington.

Dr. John C.K. Daly is a non-resident Senior Scholar at the Central Asia-Caucasus Institute, Johns Hopkins University School of Advanced International Studies in Washington DC.