A Chinese group has launched its own peace award as a riposte to the Nobel peace prize following Beijing's fury at the decision to honour the jailed dissident Liu Xiaobo.

The organisers will hand out a Confucius peace prize tomorrow – a day ahead of the Nobel ceremony in Oslo.

They argue that China "should have a greater voice on world peace" because it has over 1 billion citizens, while Norway is small and the Norwegian committee "could be inevitably biased and fallacious".

Beijing has attacked the choice of Liu, a 54-year-old critic and writer, as an infringement of its sovereignty and an example of western ideological warfare.

Liu is serving an 11-year prison sentence for incitement to subversion. He had co-authored Charter 08, a bold appeal for democratic reforms in China.

Eighteen other countries have said they will not attend Friday's Nobel ceremony after China warned diplomats in Oslo not to attend and said there would be "consequences" if they did so.

The Confucius peace prize, named after China's most influential philosopher, was created to "interpret the viewpoints of peace of [the] Chinese [people]," the awards committee said in a statement.

The Chinese state media has yet to mention the award, and it is not clear to what extent it has official backing. The invitation to the award ceremony was apparently issued by a section of the culture ministry, but a publicity official there told Reuters: "Everyone keeps calling to ask about this … we don't know."

The group's chairman, Tan Changliu, acknowledged that the prize was not well-known, adding: "It needs to grow gradually, and we hope people will believe the award is of global significance."

Liu Zhiqin, the Chinese businessman who first proposed the idea in an opinion piece, argued that the Norwegian judges had "[supported] a criminal while creating 1.3 billion 'dissidents' that are dissatisfied with the Nobel committee".

He added that China should teach westerners to "kindly treat people that have different national values and lifestyles".

Chinese citizens who have backed the award to Liu have experienced harassment, surveillance and detention. Many activists and dissidents have been prevented from travelling abroad to ensure they do not attend Friday's ceremony.

The Confucius prize committee said it had chosen Lien Chan, a former Taiwan vice president and still a powerful figure within the Nationalist party, as the first winner. It said he had "built a bridge of peace between the mainland and Taiwan".

An employee in Lien's Taipei office said she could not comment because she knew nothing about the prize.

Other nominees included Bill Gates, Nelson Mandela, Jimmy Carter, Mahmoud Abbas and the Panchen Lama.

The lama – the second highest monk in Tibetan Buddhism – is a highly controversial figure because a six-year-old boy identified by the Dalai Lama was rejected by authorities and has not been seen since.

Beijing announced that a search committee had selected another boy, who is now Panchen Lama.

The Confucius prize includes a 100,000 yuan (£9,500) award, while the Nobel peace prize winner receives 10m kronor (£1m).

"The idea of the Confucius peace prize can only be described with one word – absurd," the Chinese rights lawyer Teng Biao said.

"Of course there are aspects of Chinese tradition that should be respected and carried on, and some Confucian ideas are valuable as well, but definitely not in this way.

"Peace is not measured by the population or space of a country. Saying Norway is a small country so it does not have much say on peace [or human rights] is just ridiculous … Norway is one of the most free and democratic countries in the world.

Steve Tsang, a China scholar at Oxford University, said: "The whole thing is too obviously being rushed to counter the Nobel prize to Liu Xiaobo.

"People will see it for what it is. That being the case, it's not going to be very credible."