China launched the first stage of an Asian development bank Friday, state news agency Xinhua said, in what is widely seen as a challenge to U.S.-backed international banks.
The Asian Infrastructure Investment Bank was founded with the signing of a memorandum of understanding by representatives of 21 Asian nations, the agency reported. Initial capital of $50 billion will support the bank, seen as a competitor of the World Bank and the Asian Development Bank.
The new bank will be headquartered in Beijing and be formally established by the end of next year.
However, several of the region’s biggest economic powers were not present, including Indonesia, South Korea, Japan and Australia.
Bangladesh, Brunei, Cambodia, China, India, Kazakhstan, Kuwait, Laos, Malaysia, Mongolia, Myanmar, Nepal, Oman, Pakistan, the Philippines, Qatar, Singapore, Sri Lanka, Thailand, Uzbekistan and Vietnam signed the memorandum.
China has limited influence in the World Bank and the Asian Development Bank despite its economic status.
The new bank will make loans for infrastructure projects to developing countries.
Chinese President Xi Jinping said the new bank would use the best practices of the existing international banks, but the U.S. State Department expressed it had concerns about the “ambiguous nature” of the proposed bank structure.