The defeat was foreseeable. The U.S. has failed to block the incorporation of the Asian Infrastructure Investment Bank (AIIB) with a sizable number of Western countries as founding members — underlined by weekend news that Australia will sign up as an adherent, joining the U.K., Germany, France, Italy and Switzerland.

These are all American allies not afraid of defying Washington’s wishes.

China, the instigator of the development institution that will challenge the Word Bank and the Asian Development Bank in some key spheres, is indicating it will take a statesmanlike line on what Beijing sees as a major American diplomatic miscalculation.

China is likely to hold out an olive branch by saying it wishes Washington to come on board the AIIB in future years, drawing a discreet veil over the likelihood that the U.S. Congress would refuse the administration’s request to join even if it wanted to. Beijing appears to understand the divergent views within the Obama administration, with the U.S. Treasury much less heavy-handed than other factions.

China will do its best to scotch American and other Western concerns over the AIIB’s governance by recruiting top-notch international management and policing a firm line on environmental and social standards for the bank’s lending. The AIIB’s starting arrangements, with over 40 members, are likely to be to be confirmed at a two-day meeting of prospective adherents in Almaty, Kazakhstan, which ends on Tuesday.

There is a link between the AIIB and Chinese efforts to become part of the Special Drawing Right, the International Monetary Fund’s composite currency unit, under a review to be concluded by the end of the year. A key component of China’s bid for the renminbi’s SDR inclusion, despite the renminbi’s lack of full-scale formal convertibility, is that the SDR could be reinforced by bringing in the relatively strong Chinese currency.

Enlarging the SDR to include an emerging-market currency could promote the SDR’s adoption as the AIIB’s unit of account, extending the SDR’s use by other international organizations such as the Bank for International Settlements and the African Development Bank.

Momentum to forge the AIIB has risen sharply since it was first broached in 2013.

One strong reason for the inception is Asia’s frustration over the U.S. Congress’s refusal to ratify modest reform of the International Monetary Fund decided by member countries in 2010, which would give China and other leading emerging-economy economies slightly more say in running the Fund. In addition, more financing is plainly needed in the light of Asia’s large backlog for infrastructure development since the Asian financial crisis of 1997-98.

Non-Asian countries’ race to join as founding shareholders reflects Western governments’ desire to gain infrastructure contracts for their companies, as well as efforts by countries like Britain, Germany and Luxembourg to win renminbi trade, investment and other financial market business as the Chinese currency’s cross-border use grows.

Australian Prime Minister Tony Abbott announced on Sunday that Australia would be signing up to the AIIB after months of hesitancy. Australia wants a hands-on board of directors representing shareholders that would control main investment decisions. China wishes most decision-making to be devolved to management — likely to be based in Beijing, even though Indonesia is holding out for Jakarta as an alternative.

These issues are secondary, however. The U.S. and China, the world’s two main economic powers, have locked horns over establishing a major development bank that could rival the twin Bretton Woods institutions — and Beijing has emerged, for the first time, as the clear winner.

Written by DAVID MARSH on March 30, 2015 for MarketWatch.