Global institutions, including the International Monetary Fund (IMF) and the World Bank, have endorsed a China-led international bank, despite opposition from the U.S.
"We are comfortable with the idea of a bank that puts together finance for infrastructure, because our view is that there is a huge need for infrastructure in emerging markets countries," David Lipton, the first deputy managing director of the IMF, told CNBC early on Monday.
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The $50-billion Asian Infrastructure Investment Bank (AIIB) is being established to meet the need for greater infrastructure investment in lower- and middle-income Asian countries. It comes amid complaints by China and other major emerging economies that they lack influence in institutions such as the IMF, the Asian Development Bank and the World Bank.
Support for the AIIB has gathered speed in Europe this month, with the U.K. the first country to sign up, followed by Germany, France and Italy and then Luxembourg and Switzerland.
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However, Washington has expressed misgivings, officially because of concerns about standards of governance and environmental and societal safeguards. Unofficially, the country's is thought to be worried about sacrificing its clout in Asia to China, as well as piqued by criticism of slow reforms in the IMF and World Bank.
"While this is seen as a diplomatic setback for the Obama administration, the underlying (blame) may lie with Congress," said strategists led by Marc Chandler at Brown Brothers Harriman in a research note on Monday.
"It has blocked IMF funding which is the precondition for reforming the voting (quotas), which would give China and other developing countries a greater voice. In contrast, the Obama Administration seems to recognize that if China (and others) do not get a larger voice in the existing institutions, it will create parallel institutions."
He added: "The frustration with the U.S. is palpable."
China 'a leader of the world'
"China is now a leader of the world," Sri Mulyani Indrawati, managing director of the World Bank, told CNBC on Sunday in Beijing.
"They (Chinese leaders) try to show that they have sound principles in not only presenting a development solution, but also in establishing this new institution and that is why many of the countries now are becoming members of this institution."
Jim McCaughan, CEO of Principal Global Investors, said that China's move was part of a bid to establish the yuan as a global currency—and that the U.S. might be more positive towards the AIIB then its official statements suggested.
"I think Washington will collaborate; I do not think it will officially join, but I think they will collaborate, at least behind the scenes," McCaughan told CNBC early on Monday, adding that the bank was part of a "bigger picture."
"Ultimately, Chinese economic policymakers, I believe, are pushing towards the idea of the renminbi as a reserve currency… this is one small step in that direction, having a multilateral institution that they can lead," McCaughan said.
Chandler concurred. "Being recognized as a reserve currency and included in the SDR (Special Drawing Rights) basket would be a recognition of China's reform efforts and its increasing importance in the world economy. It would likely further enhance the internationalization of the yuan."
He added that some of Washington's concerns about the AIIB were valid.
"Leaving aside U.S. parochial concerns, which seem to be over the increase of China's influence, there are reasonable questions about the transparency and governance of the AIIB," Chandler said.
"It does not appear to be simply a development bank with China as a key shareholder. Rather than promote neo-liberal values, embodied in the Washington Consensus, the AIIB could encourage China's state capitalism model. The criteria for picking projects is also not clear."
Clarification: This story has been clarified to reflect that Sri Mulyani Indrawati, managing director of the World Bank, told CNBC that "China is now a leader of the world."