China's position in financial services is strong. Its 12.7 percent revenue share is second only to the U.S. In the more strictly defined sphere of banking, China's 17.7 percent share is the world's largest, exceeding the U.S. The profitability of China's financial services is also world number one. In contrast in non-financial services (retailing, travel, media, hotels etc) China's share, only 4.0 percent, is weaker even than its position in manufacturing - the stark contrast with the 43.7 percent share held by U.S. companies is evident. A clear distinction must therefore be drawn between China's position in global financial services (strong) and its position in non-financial services (very weak).

The other strong positions held by China among global companies are in the relatively small sector of construction, where its companies hold the world's number one position, and in primary products (oil, mining, basic metals, electricity, gas and water supply) where it is second in the world after the U.S. In conglomerates China's position is weak, but as this is a small sector it is not a serious problem.

These trends make clear that among large companies, which dominate every economy's development, China is not following the progression from primary industry, then to secondary industry and tertiary industry found in many economics textbooks. It is following a path of development from primary industry to financial services, and then to manufacturing and non-financial services. This same pattern can also be found in the large developing economies of Brazil and India - calling into question the general applicability of the "textbook scenario."

There is a clear internal logic to this pattern of development. It corresponds to China's overall macroeconomic position. China has already overtaken the U.S. in financial resources available for investment. China's total savings in 2011, the latest year for which internationally comparative data is available, were $3.6trillion compared to $1.8 trillion in the U.S. As savings are the "raw material" of the financial sector, this explains why China's position in global financial services is strong.

The dynamic of the development of China's companies in global competition flows from this. The dominance established by China in funds available for investment has already established its financial companies as among the world's strongest. This macroeconomic financial strength is also gradually spilling into other sectors through its role in developing technology (through R&D and M&A) and managerial skills (as China's companies increase in scale and globalize). It is therefore logical that China, in line with other large developing economies, should establish a strong position in financial services before this spreads into other sectors, manufacturing and non-financial services, where it is still remain comparatively weak compared to foreign competitors.

In short, the rise of China's companies in global competition is striking. But to understand this dynamic it is necessary, first, to understand that financial services is currently a stronger sector for China in global competition than manufacturing, and second to cease treating the "service" sector as a whole and instead grasp the different dynamics in international competition operating in the financial and non-financial service sectors of China's economy.

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

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

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