China is slightly ahead of the U.S. in manufacturing output but a significant part of this is from foreign companies, which account for half of China's manufacturing exports. It is therefore crucial not to confuse China as a base for manufacturing with the strength of China's own manufacturing companies.

To illustrate the contrast, note that China's GDP is slightly more than half the size of U.S. GDP at market exchange rates. But in 2012 the turnover of U.S. manufacturing companies in the world's 2,000 largest listed companies was $3,007 billion, almost 10 times the $316 billion of Chinese manufacturing companies. China's manufacturing companies are, therefore, much smaller in scale relative to U.S. competitors, than the size of China's GDP compared to the US indicates.

In banking, reflecting the financial trends analyzed above, the situation is the reverse. U.S. banks reporting last year were still ahead of China's on revenue – $550 billion compared with $404 billion, and assets – $10,079 billion compared with $9,895 billion. China's banks had, however, overtaken their U.S. competitors with regard to profits $105 billion compared with $68 billion. In addition, China's banks held the lead in stock market valuation, $992 billion to $847 billion.

At the beginning of 2013 China and the U.S. each had four out of the world's top 10 banks by market capitalization; but the total valuation of the Chinese banks was $706 billion compared with $620 billion for U.S. banks.

Therefore, although China's GDP is slightly more than half that of the U.S., the overall financial position of China's banks is already equal to their U.S. competitors. In overall terms, China' banks are therefore stronger relative to their U.S. competitors than would be expected from the relative size of the two countries' GDPs. China's far more rapid buildup of domestic finance means the balance will progressively and rapidly move in favor of its institutions; and within a relatively short period of time, the overall financial position of China's banks will overtake U.S. banks on all measures.

The traditional strength of U.S. banks over their Chinese competitors lay in the fact that Chinese banks were essentially domestic banks whereas U.S. banks operated globally. This situation will change, however, as Chinese banks go global.

First to globalize were China's official development banks. From 2005-2011, according to an independent academic report titled New Banks in Town: Chinese Finance in Latin America, it is estimated that China Development Bank and Export-Import Bank of China provided more than $75 billion in loan commitments to Latin America. In 2010 their $37bn commitment was more than the World Bank, Inter-American Development Bank and United States Export-Import Bank combined. In Africa, China's Exim Bank has lent more than the World Bank every year since 2005, its loans in 2011 totaling $15 billion.

Globalization of China's commercial banks is following. By the beginning of 2013, ICBC, which has led China's commercial banks in globalization, operated in 39 countries with overseas assets of $170 billion, a 30 percent increase on 2011. The stability and state guarantee of China's banks is attractive compared with the continued scandals afflicting their U.S. and European competitors.

There is a clear dynamic: China's annual creation of finance for investment doubles that of the U.S., meaning that China, not the U.S. is the world's financial superpower. China is strongest in sectors which are closest to finance and it will take a longer time to turn that financial strength into institutional strength in sectors outside finance. One thing is certain. China's banks will overtake their U.S. competitors long before China's manufacturing companies overtake their U.S. competitors. The emergence of ICBC as the world's largest company in the 2013 Forbes Global 2000 list is just a taste of what is to come.

The author is a columnist with China.org.cn. For more information please visit:

http://www.ccgp-fushun.com/opinion/johnross.htm

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.