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China has begun to flex diplomatic muscle to match its economic might, shaking pillars that support America's global supremacy.

The first big jolt came in July from the founding by China, India, Brazil, Russia and South Africa of a "New Development Bank" as an alternative to the U.S.-dominated World Bank and International Monetary Fund. China was the prime mover behind this "BRICS bank" and its headquarters is in Shanghai.

Next was Asia's turn.

On Oct. 24, representatives from 21 Asian nations attended a signing ceremony in the Great Hall of the People in Tiananmen Square to establish an Asian Infrastructure Investment Bank (AIIB) to be based in Beijing.

Lobbying by the United States persuaded Australia, South Korea and Indonesia to stay away. Officially, their boycott was prompted by concerns that China will not abide by World Bank rules, but that was not the real reason.

"In the name of seeking high standards around issues like environmental and social safeguards, the United States is fundamentally in a scramble to head off a loss of influence in Asia," according to Scott Morris of the Center for Global Development.

Asia has a huge funding gap for infrastructure. Plugging it will require $8-trillion (U.S.) in investment between 2010 and 2020, according to the Asian Development Bank (ADB).

"In Asia, we see enormous requirements for infrastructure. Without appropriate and adequate transport, countless millions of people lack access to jobs, markets, hospitals and schools," said Haruhiko Kuroda, who was ADB president before becoming governor of the Bank of Japan last year.

After several increases, the ADB still has only $165-billion in capital, while the World Bank has $223-billion.

Critics such as Mr. Morris blame the ADB's failure to rise to the challenge of funding Asia's infrastructure needs on the U.S. veto of further increases in the bank's capital.

"The United States has responded to these calls with a decisive 'no.' And not just no to more U.S. money in the ADB, but no to more of anybody's money in the ADB," he says.

As presently constituted, both the World Bank and ADB are relics of bygone eras.

The World Bank was created in 1944 to rebuild Europe after the Second World War. The United States is its largest shareholder (16.05 per cent), followed by Japan (8.94 per cent) and China (5.76 per cent). Since its inception, every World Bank president has been an American citizen.

The ADB was established in 1966, when China stood on the cusp of the decade-long Maoist madness of the Cultural Revolution. The Vietnam War was raging, and Lyndon Johnson, the U.S. president, insisted that the new bank be based in the Philippines, an anti-communist bastion that was providing troops to fight alongside the U.S. in Vietnam, rather than in Japan, where there were large anti-war demonstrations. Japan, then the undisputed economic leader and great success story of Asia, was furious but forced to acquiesce.

Thus was born the strange anomaly of the ADB being headquartered in Manila, although its two largest shareholders are Japan (15.7 per cent) and the United States (15.6 per cent), who together exert a strong influence over ADB policy, lending and staffing. China may be Asia's dominant economic power, but it still only holds a 6.5-per-cent share, while ADB presidents continue to be drawn exclusively from Japan's Ministry of Finance.

American pressure not to join the Beijing-based AIIB reignited controversy in Australia over policy on China, which accounts for a third of Australian exports and a fifth of its imports, and is the biggest source of fee-paying students and tourist visitors.

"As soon as the governance and transparency arrangements reflect those of other multilateral institutions, well not only would Australia be in it but I'd expect that Japan, the United States, [South] Korea and everyone else will be in it," Prime Minister Tony Abbott told Bloomberg in an attempt to douse the flames.

The implications of two new development banks in Shanghai and Beijing had barely had time to sink in when China announced two more megaprojects. President Xi Jinping said China would contribute $40-billion to a Silk Road infrastructure fund to build new trade and transport links along ancient caravan routes that once connected China to the Mediterranean through Central Europe. At the same time, Russia and China agreed to pipe more Siberian gas into western China, six months after signing a landmark $400-billion gas deal.

If all this grandstanding largesse sounds like the pride that precedes a fall, consider China's bonanza from a 30-per-cent fall in oil prices.

If, over the next 12 months, the price of crude averages $85 a barrel, then the amount China will save on its energy bill will exceed its commitments so far to the New Development Bank, the Asian Infrastructure Investment Bank and the Silk Road Fund.

Mr. Xi must be smiling in Beijing. We doubt that the present occupant of the White House is doing the same.

Peter McGill is a journalist with more than 30 years of experience of reporting on Asia. Kenneth Courtis is chairman of Starfort Holdings and a co-founder of Themes Investment Management. He is a former vice-chairman of Goldman Sachs Asia.