In this light, China-backed finance has the potential to be nothing short of a 21st century “Marshall Plan”, and couldn't come at a better time. Western-backed financial institutions have not been able to increase their capital in proportion to the growing needs in the world. According to some estimates, development banks fall short of providing lending for poverty alleviation by $175 billion a year.

The World Economic Forum projects that by 2020 about $5.7 trillion will need to be invested each year into green infrastructure in developing countries. Not only will this require shifting the current $5 trillion into a greener direction, there will be need to increase $700 million more each year to make the shift happen.

Washington can hardly complain about its sideline status. It was invited to take part in the AIIB. Not joining it is a choice made by the US government. But the US has not only refused to play, it has lobbied Australia, the Republic of Korea, Indonesia, as well as European countries not to join in. The UK has decided — and so have France, Germany and Italy — that it would be foolish not to be part of these efforts. Australia is now considering joining in as well. Others are bound to follow and leave the US standing alone.

Obama's official complaint is that the AIIB will not replicate the transparency and anti-corruption norms, as well as the safeguards for social and environmental protection found in Western banks. This claim doesn't even pass the laugh test. Negotiations for the AIIB are not even underway yet — and the US move means it is foregoing an active role in the negotiations where these issues will be on the table.

The US has long demanded that other major countries share the burden of global initiatives and institution building. Now that China has stepped up to the plate, Obama is passing up an opportunity for the US to take part in a legacy-making 21st century “Marshall Plan”.

On top of that, he is alienating Asians, Western allies and his own party. The US government should be embracing the AIIB and abandoning the TPP, not the other way round. Hopefully, our global allies and Obama's own party will help him see the light.

The author is a professor of global development policy at Boston University's Pardee School for Global Studies./The Globalist