U.S. business magazine Forbes has just calculated that Industrial and Commercial Bank of China (ICBC) is the world's largest company when taking into account revenue, profits, assets and market capitalization. This is the first time a Chinese company has held that position in the annually published Forbes Global 2000 list of the world's largest publicly quote companies. That China Construction Bank was ranked number 2, Agricultural Bank of China number 8, and Bank of China number 11 also testifies to the growing strength of China's financial sector. This should help correct a widespread misunderstanding of the real core of China's economic strength.

An oft-cited view that China's economy is strongest in physical production or certain service sectors appears to be supported by an impressive string of statistics, which are frequently rolled out: China produces more cement than the rest of the world put together, more steel than the next 20 countries combined, has the largest number of car sales in the world, is the only country with more than 1 billion mobile phone users, and has more than twice as many Internet users as the U.S.

These are impressive statistics but they understate because they are not the core of China's economic strength. China's greatest economic strength is finance. In this field China has already overtaken the U.S. even before China' GDP equals that of the U.S. This dynamic will determine the strategic development of China's economy over the coming decades and the emergence of ICBC as the world's largest company this year reflects that process.

To illustrate this, the chart below shows the total amount of finance available for investment (total savings) each year created in China and the U.S. The data is not percentages but the absolute amount in dollars at market exchange rates.

In the latest year for which data is available, the total annual finance created for investment by both countries was a clear indication of both the current position and the future trend: China created $3.6 trillion; the U.S. $1.8 trillion. China's sum is already twice that of the U.S. and its lead is increasing.

These savings are not only the requirement for investment but also the "raw material" of financial institutions. The dynamic which flows from China already overtaking the U.S. in this field can be clearly seen by comparing China's finance and manufacturing companies. This shows that China's strongest sector in terms of international comparative strength is not manufacturing, as often believed, but banking, the sector closest to finance.