Chinese President Xi Jinping and his guests at the creation of the Asian Infrastructure Investment Bank at the Great Hall of the People in Beijing on Oct. 24, 2014. (Takaki Yajima/AFP)

China launched the Asian Infrastructure Investment Bank (AIIB) in October of 2014 and has met with nothing but opposition from the United States. Officially, the objection cited by the United States is a lack of clarity about AIIB’s governance, as well as concerns about whether the AIIB will adhere to strict environmental and labor standards in its operations. It is clear, however, that U.S. opposition also derives from fears that the AIIB — spearheaded by China and part of China’s “New Silk Road” strategy — will diminish U.S. leadership in the region.

But if the AIIB jeopardizes U.S. leadership in Asia, it will be a result of the manner in which American authorities have responded to the organization. Through its intransigence, the United States continues to push Asian countries — including certain key allies — away. By refusing to participate in this new institution, the United States gives up a vital role in shaping the Asian regional development agenda. And by goading other bilateral and multilateral donors to resist the AIIB, the U.S. government may end up cutting American investors off from the potential benefits of private investment in Asian infrastructure.

Despite its efforts, the United States has been unable to keep its allies from joining the AIIB. Earlier this year, Saudi Arabia applied for membership. Last week, the United Kingdom announced that it would join as a founding member — a move that received a rare, public rebuke from the White House. Now a trio of European powers — France, Germany and Italy — have also applied for membership.

Ironically, the founding of the AIIB is partly a result of the United States’ unwillingness to reform the Bretton Woods institutions. Since 2010, the U.S. Senate has refused to ratify an agreement on governance reform that would have doubled resources available to the International Monetary Fund (IMF) by increasing capital contributions from emerging market countries, which would proportionately expand their voting power on the IMF Executive Board — where current quotas treat France as though it were more economically dominant than China, and Belgium more dominant than Brazil.

Nevertheless, the United States has used its blocking vote at the IMF to keep countries such as China, India and Brazil underrepresented. Late last year, IMF Managing Director Christine Lagarde warned that governments would be forced to look for “alternative options” by which development financing could be provided. Not surprisingly, the New Development Bank — the so-called “BRICS Bank” — was launched by Brazil, Russia, India, China and South Africa to fund development projects in member countries outside of the traditional multilateral channels. As we have pointed out, the BRICS bank will be managed by governments with little in common beyond their dissatisfaction with the Bretton-Woods institutions.

The AIIB is yet another creation whose aim is to challenge the hegemony of institutions dominated by the United States, Western Europe and Japan. Unlike the BRICS Bank, whose main shareholders may face coordination problems due to the equal distribution of voting shares, the AIIB faces no such difficulty since China will provide the largest share of resources. It also, of course, has a far more focused mission than the BRICS Bank.

In fact, the developmental logic behind the AIIB is paramount. Asia faces a massive infrastructure gap. The Asian Development Bank (ADB) estimates that Asia will need $8 trillion over the next decade for energy, transportation, telecommunication and water/sanitation. Private investment in infrastructure, according to the ADB, hovers at $13 billion a year, the majority of which is concentrated in low-risk projects. Official development assistance adds another $11 billion a year in financing. If true, this means that the shortfall exceeds $700 billion a year. The United States, as a result, places itself in opposition to regional investments that can expand trade, support financial market development and macroeconomic stability, and improve environmental, health and social conditions.

Were the current group of international financial institutions capable of plugging the gap, it is unlikely that the AIIB would gather worldwide support. But existing institutions cannot hope to fill this hole. The ADB and the World Bank have a combined capital base of less than $400 billion, which must support a wide variety of lending programs beyond infrastructure. Moreover, there is little chance that bilateral donors — including the biggest bilateral donor, the U.S. government — will increase its funding for foreign aid in the current political climate. The AIIB has an initial capital base of $50 billion, with authorized capital up to $100 billion. According to one estimate, using similar loans-to-equity ratios of the World Bank and ADB, the AIIB could commit some $30 billion in loans devoted exclusively to infrastructure (the World Bank’s own infrastructure financing was $24 billion in 2014).

In effect, the United States is informing fast-growing Asian nations:  We are not going to increase official funding for your important needs anytime soon; we are also going to prevent the institutions we control from increasing their funding for those needs; and lastly, we are going to admonish others from devising other ways of funding you. No wonder that Asian governments have jumped on the AIIB bandwagon. Australia, Indonesia and South Korea were conspicuously absent from inauguration ceremonies last year when they shared U.S. concerns. But now they have all warmed to the idea of joining the AIIB (Indonesia became a founding member, while Australia and South Korea have applied for membership). Moreover, ADB and World Bank officials have extended a cautious welcome to the new China-led bank, saying they see room for collaboration. But the clearest signal of the AIIB’s appeal has come from officials in Taipei, who have announced that Taiwan, too, will join the organization as Taipei, China. If Japan also joins — as is now expected — it will leave the United States isolated among major donor nations.

Not only does the United States endanger its own regional influence through its refusal to participate, it also threatens private American investment. Unlike most types of private investment, infrastructure projects tend to have extremely high up-front costs and longer maturities. This leaves infrastructure investors much more vulnerable to sovereign risk, regulatory instability, shifting political winds, and the threat of expropriation. For this reason, multilateral development banks play a critical role in attracting private infrastructure investment to developing countries through “additionality,” that is, by contributing their own funding, bringing financing partners into specific deals (through syndications or co-financing), and by using risk guarantees and other tools. Importantly, multilateral development banks cannot offer support to investors from non-member countries. Should the AIIB develop its own system of risk insurance and partial guarantees, they will not be available to American investors.

Asia, the United States — and for that matter, the whole world — would be better off if the United States were to participate in the AIIB. What better way to encourage the Chinese to implement a transparent regime that adopts global best practices in financing infrastructure than to be a voting member? If anything, China’s move towards multilateralism should be welcomed. Rather than rebuke others for joining, the U.S. should consider doing the same.

Raj M. Desai is associate professor of international development at the Edmund A. Walsh School of Foreign Service and in the Department of Government at Georgetown University, and a non-resident senior fellow at the Brookings InstitutionJames Vreeland is associate professor of international development at the Edmund A. Walsh School of Foreign Service and in the Department of Government at Georgetown University.