One key reform would be interest rate liberalization. Interest rates are set centrally by the People's Bank of China and so domestic banks cannot set their own interest rate spreads and compete for funds or even price risk. This has resulted in a lack of effective competition in the domestic banking sector.

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Mike Werner, senior equity analyst at research group Sanford C. Bernstein in Hong Kong, says that without this experience it is often difficult for Chinese banks to compete abroad.

"In China as a private individual, if you think where you are going to put your money, it is either property, equities or deposits. Equities haven't done so well, property has been clamped down on so the banks have this captive audience for deposits.

"If you are in the US or Europe you don't have this captive audience because you are competing against all the other investment alternatives."

Despite this headwind, the Chinese banks have been stepping up their overseas operations.

The overseas assets of ICBC, which acquired 80 percent of Standard Bank's Argentinian assets over the last year, grew by 30.5 percent to $162.7 billion, some 5.8 percent of the group's total assets.

Bank of China's overseas assets (when Hong Kong, Macao and Taiwan operations are added) stood at $483.6 billion last year, an increase of 13 percent on the previous year and some 24.7 percent of its total assets.

The merger-hungry China Construction Bank's $83.6 billion represented a 17 percent increase. Agricultural Bank of China saw the biggest rise in its overseas assets. They soared 92.9 percent to $38.78 billion, 1.8 percent of the group's total.

Ba Shusong, deputy director general at the Development Research Center of the State Council, says Chinese banks began to develop their international operations after China joined the World Trade Organization in 2001 but that this has developed momentum with the government's tight control of credit in the domestic market.

"We have witnessed many mergers and acquisitions outside China by (the Big Four) banks and there must be more in the future, since making acquisitions is a much more effective way for them to expand their international business than building up branches from scratch," he says.

May Yan, director and head of China banks research for Barclays in Hong Kong, says it is a major challenge for Chinese banks to become dominant in overseas markets since very few foreign banks have succeeded before with this strategy.

"If you look at commercial bank history, not many have been very successful at becoming global banks. HSBC is perhaps the exception. The Spanish banks have been big in Latin America but not in the United States. Most banks are stronger in their home markets than they are globally."

Yan says a salutary lesson for China is Japan whose banks have attempted to become dominant international players for 30 years but have largely failed.

"Nomura, for example, has made a number of bad decisions. It was in CMDs (commercial mortgage-backed securities), the structured products business and the commercial real estate business. It went into all of these aggressively trying to make money and then there was always a blowout," he says.

Martin Jacques, a leading China commentator and author of When China Rules the World, questions whether it is actually desirable for China to take on the mantle of a financial superpower.

"China is going to become the major financial power. It is inevitable almost but there are major risks.

"What happened to Britain from the middle of the 19th century is very instructive. As the City of London grew and became the financial center of the empire, industrial interests became subordinated to the financial interests, with malign consequences for the economy over the next century."

Jacques says the problem for China is that it doesn't have the option that Germany has had - to focus mainly on manufacturing and opt out of becoming dominant in financial services.

"Germany didn't develop a financial sector, and its currency was never dominant in the West. China's economy is going to be far bigger, and it has to inevitably develop a large financial sector. It shouldn't, however, lose sight of how important its industrial base is."

If Chinese banks are going to be the next big thing, not all investors are buying into the growth story.

The recent trend in the United States has been for investors to sell their Chinese bank holdings.

Goldman Sachs sold a $2.3 billion stake in Commercial Bank of China last year, following the sale of a similar holding in ICBC.