ONE effect of the international financial crisis was to elevate Industrial and Commercial Bank of China to the world's number one bank by both market capitalization and profit. Last week ICBC reported a further 26 percent rise in profit to US$33 billion.

ICBC is leading China into an increasing number of emerging markets. It was the first Chinese bank to open a branch in India and the first Chinese bank to obtain an operating license in Pakistan. ICBC's deposits and profits in the Middle East doubled last year. In 2007, the bank bought a 20 percent strategic stake in South Africa's Standard Bank. Recently it took over 80 percent of that bank's Argentine subsidiary.

One of the next likely steps for Chinese banks, including ICBC, was highlighted at last week's BRICS summit in a proposal that member countries set up a development bank. As a Financial Times editorial noted: "The BRICS brand … has focused attention on the rising power of five fast-growing economies that account for almost half the world's population and a quarter of its economy… BRICS members may be ready to consider … funding a development bank of their own. The potential benefits could be huge."

If the last five years' experience in Latin America is anything to go by, the creation of such a development bank would be rapidly followed by expansion of ICBC. Since 2005 China's official financial development arms - China Development Bank and Export-Import Bank of China - have provided loans of more than US$75 billion to Latin America. This helped provide a favorable backdrop for ICBC to take over Standard Bank in Argentina.

In advanced economies like the US and Europe, however, China's banks, including ICBC, have apparently not yet entered the tiny handful of very top players. So it's worth analyzing how reality, not simply appearance, is developing, the present strategies being pursued by ICBC, and the dynamics to be expected over the next period.

The financial base of China's banks is so simple and powerful that, unless a very large policy error is made, it will gradually push obstacles out of the way. All that is required is time, during which China's banks gather necessary management experience and expertise.

More savings

The reason for this dynamic is that China has far and away more savings, the raw material of banks, than any other country - this is in absolute dollar terms and not simply relative to the size of China's economy. In 2010, the last year for which comprehensive data exist, China's total annual savings were US$3.1 trillion. This compared to US$1.7 trillion for the US. China's savings, the potential financial fuel for its banking system, were already 82 percent larger than those of the US.

China's annual savings have only overtaken the US in absolute terms since 2008. The US has had a much longer time to accumulate its stock of savings. But China's annual lead over the US is large and increasing. In 2008 China saved US$587 billion more than the US, while by 2010 this had become US$1,385 billion. The preliminary data for 2011 indicate that China's lead over the US grew further to over US$1,500 billion.

This is already translating into a superior total profits performance of China's banks compared to the US. In the fourth quarter of 2011, according to data from the China Banking Regulatory Commission and the Federal Deposit Insurance Corp, China's 3,800 banks had a net income of US$35.4 billion, a third more than the total of the 7,357 US banks.

The largest US financial institution is mortgage lender Fannie Mae, with US$3,222 billion assets in 2011. But having been rescued from bankruptcy in 2008, the market judges Fannie Mae as worth only a fraction of its assets - its market capitalization was US$460 million. The largest non-bankrupt US financial institution was Bank of America, with assets of US$2,265 billion and market capitalization of US$146 billion. ICBC's assets, by comparison, were US$1,724 billion, but its market capitalization was US$240 billion. ICBC's assets were therefore 58 percent of Fannie Mae's and 82 percent of Bank of America's, but ICBC's market capitalization was 64 percent higher than Bank of America and more than 500 times that of Fannie Mae.

The market evidently judged that, despite the US companies' higher assets, ICBC was a sounder and more profitable financial institution. This conclusion was amply justified by the stability of China's banking system during the 2008 financial crisis, compared to the implosion of US banks. Behind that stability lay the overwhelming financial firepower of China's savings.

Despite its huge financial strength, ICBC is clearly pursuing the typical Chinese multinational company strategy of "using the countryside to surround the cities" - that is, building up a very strong position in developing economies while biding its time and accumulating management experience in developed ones. ICBC has been operating in the New York property market, and it is now offering renminbi accounts with attractive interest rates to UK retail customers.

International player

But ICBC clearly wants to build up its management expertise further before entering into a wide range of competitive markets in developed economies. Even within Europe, ICBC is building up its position in developing economies, recently applying to operate in Poland.

The scale of ICBC's international ambitions is shown by the fact that, in mid-2011 the bank's overseas assets were around 4 percent of its total, but it stated its aim was to raise this to 10 percent - a challenging target given the rapid build-up of ICBC's assets in China.

With the world's biggest financial base to draw on, ICBC has already become a key player internationally in emerging markets. Its decision to proceed more slowly in developed economies is part of a clear and coherent strategy while it builds management expertise. When it has accumulated that expertise, ICBC's unparalleled financial firepower means it will play as big a role in advanced economies as in developing ones.

The world is just going to have to get used to the fact that the world's No. 1 bank is Chinese.

John Ross is currently a visiting professor at Antai College of Economics and Management, Shanghai Jiao Tong University. From 2000 to 2008, Ross was London's director for economic and business policy.