New bank a challenge for Bretton Woods

Indeed, Xi's proposal has ruffled some feathers, especially in Japan and the US, for these countries stand to lose some of their power and influence. Tokyo and Washington have worked together to maintain the power structure in the 67-member ADB where they each hold 15.7 percent of votes, against a paltry 6.5 percent by China.

Reports indicate that the US is pressuring Australia and South Korea not to join the AIIB. But as Hedley Bull, eminent late Oxford professor, once said, "people have friends but countries have only interests". Thus Australia, India and South Korea will decide whether or not to join the bank based on their national interests.

China has considerable experience in infrastructure planning and construction, and financing projects outside the country. As Finance Minister Lou Jiwei has said, China Development Bank's commercial infrastructure loan is now far bigger than that of the World Bank and ADB combined. And surprisingly, this process started only 20 years ago.

China has often been accused of lending funds to developing countries without taking into consideration good governance, and environmental and social safeguards. Projects in China have often suffered from similar shortcomings. Although China is learning fast how to overcome the shortcomings both at home and abroad, its presence in the developing world has been positive even with the shortcomings.

Some critics argue that the AIIB will reduce the environmental, social and procurement standards in a race to the bottom. This is a childish criticism, especially because China has invited other governments to help with funding and governance.

The AIIB is a win-win proposition for everyone. For the developing countries in Asia, it will be a new source of funding. For China, it will be a channel to strengthen soft power and enhance economic benefits. For the ADB and the World Bank, it will be a challenge to perform better and undertake reforms, which are long overdue.

Cecilia Tortajada is a senior research fellow at Lee Kuan Yew School of Public Policy, Singapore, and Asit K. Biswas is distinguished visiting professor at the same school. Both authors are co-founders of Third World Centre for Water Management, Mexico.