China says 57 countries have signed on as charter members of the new China-backed Asian Infrastructure Investment Bank. They include some of the United States' closest allies, which added their names despite pressure from the White House not to join.
The Obama administration is concerned the new bank will compete with Western-led institutions like the World Bank and the International Monetary Fund, but leaders of those institutions don't seem to be worried.
The AIIB, as it's called, will be a chance for China to extend its influence by financing big infrastructure and development projects throughout Asia. World Bank President Jim Yong Kim told reporters Thursday that he welcomed the new bank. He said there is plenty of need for infrastructure spending.
"Our full expectation is that we'll continue to work with them very closely and that there are many projects that I can foresee either cofinancing or working together on," he said at the semi-annual meetings of the World Bank and IMF in Washington.
Meanwhile U.S. officials are taking a more cautious stance. They say they're not averse to working with the new bank as long as the projects it finances observe environmental and worker safeguards. Still, the AIIB is being seen by some as a sign of diminished U.S. influence in the financial system.
"We're contemplating a major institution in which the United States has no role, that the United States made substantial efforts to stop — and failed," former Treasury Secretary Larry Summers says.
He says the creation of the AIIB will undermine the leadership role the U.S. has long enjoyed in global finance. And he sees it as something of a self-inflicted wound by the U.S. Summers says China acted in part because Congress refused to approve governance reforms that would have given Beijing more power at the IMF. Meanwhile, Washington has imposed tough standards on the World Bank that have dragged out the approval process for new projects.
"In a world where others have gained and in a world where we have had trouble meeting our obligations and living up to and ratifying our agreements, we have lost influence," Summers says.
Harvard economist Ken Rogoff is more sanguine. He says China is already pouring money into development projects around the world. By lending money through a new multilateral institution, it will be forced to be more transparent.
"I think the right way of looking at it, is China's doing this stuff anyway," Rogoff says. "They're going to normalize it, they're going to have the British and others give them advice and I think it's probably something we should welcome."
Rogoff says that as a rising power, it's natural for China to seek a bigger leadership role in the world. The AIIB could be a way to do so in a more constructive manner. He says the United States probably should have welcomed China's move early on. Its failure to block the new bank has only underscored China's growing financial might.