Cross Posted From The End of the American Century

China now has the three largest banks in the world, measured by market capitalization. This is a stunning change, and yet another indicator of China's rapid emergence as a global economic power. According to a New York Times article, three years ago, China did not have a single bank among the world's top 20. Now it has the top three and four of the top ten.

The United States, due in part to the banking and financial crisis, has dropped considerably in global banking. In 2006, the U.S. had 7 of the top 20 banks, including the top 2. Now it has just 3 of the top 20 and the largest, Morgan Stanley, is rated fifth.

If banking is so crucial to market economies--as Americans are constantly being reminded that it is--then the decline of US banks, in combination with the rise of Chinese ones, provides another example of the relative decline of the United States.

Furthermore, it seems that the Chinese economy, and its banking system, is in position to weather the storm of the global financial and economic meltdown. Most of the big banks in the West lost 20% or more of market value in the first two months of 2009. In China, the top two banks lost only 3% and 8% in value, respectively and the third largest, the Bank of China, actually increased by 5%.

As the New York Times notes, while most of the world is in financial collapse, "China's economy has suddenly become too big--and too healthy, expected to grow by at least 6.3 percent this year--for the rest of the world to ignore."

Kenneth Lieberthal, a Brookings Institution scholar who oversaw White House Asia policy from 1998 to 2000, sees China as one of the first countries to emerge from the current crisis and one of the very few countries that will emerge from it "without having high levels of government debt."