I think that we may be missing an idea familiar to economists, which was developed in the second half of the 19th century. That idea is “marginalism”. It is one of those concepts universally accepted by professionals, but little understood outside. All that the “marginalist revolution” really amounted to was the recognition that economic change is determined by what happens at the margin of transaction. The extra apple sets the price for all apples; if there is one apple short, all apples cost more; one surplus, and they all cost less.

The most popular explanation is Mr Micawber’s: “Annual income £20, annual expenditure £19 19s 6d, result happiness. Annual income £20, annual expenditure £20 0s 6d, result misery.” Mr Micawber was an economist of the marginalist school.

Clearly, the United States is still by far the largest and most powerful economy on earth, with the most powerful defence technology. Yet it is China, not the United States, that is changing the global economy.

As a producer, an exporter and as an importer, the growth of the Chinese economy is changing the marginal levels of global supply and demand. Over the weekend I was reading many forecasts by eminent economists of the world economy in 2005. I was also listening to similar forecasts on television, including CCTV International, the Chinese 24-hour news service. The unanimity was astonishing, as one buzzed from channel to channel, subject to subject, and economist to economist.

What is the prospect for the dollar? That depends on China. The euro? China. The oil price? China. Industrial commodities? China. Global equity markets? China. Bond prices? China. World trade? China. World growth? China. In each case, forecast was not based on the absolute size of the Chinese economy, which is still much smaller than that of the United States. The forecasters, looking at their different markets, were all convinced that marginal changes attributable to China would be the decisive factor. That and low Chinese costs.

Some of the figures I found quite unexpected. In the past two years the growth of Japanese exports to China has accounted for 80 per cent of the growth in the Japanese economy. If one measures world trade, the United States and China together account for half of the growth. That certainly makes the United States and China the engines of growth for the whole world economy; by comparison, Europe is a miserable slowcoach. Yet China’s economy is growing at twice the rate of America’s.

In the past 30 years the whole Asian economy has averaged growth which was 3 per cent higher than the rest of the world. China is outperforming the rest of Asia.

On Saturday all the quotas on textile imports were lifted by the World Trade Organisation. This will be an extraordinary opportunity for Chinese textile and clothing manufacturers. Their current share of the US market is about 17 per cent; that is expected to rise to 50 per cent. China’s share of the European Union market is expected to rise from 18 to 30 per cent. We already buy Chinese toys; we shall soon all be wearing Chinese clothes.

Yet China is not content to remain as a producer of low or middle-technology goods. As the purchase of IBM’s personal computer division shows, China is equally a competitor in areas of advanced technology. China has an educational system designed to produce scientists and technologists for the 21st century. Except at the very highest university level, Chinese scientific education has outpaced that of Britain.

China is not only a highly successful exporter, but has also become a very large-scale importer, both of oil and raw materials and of goods from other Asian countries. In Asia, China is a net importer, not only from Japan, but also from other neighbouring Asian countries. Japan also has the benefit of being a major investor in the development of Chinese industry. The big surplus in China’s trade is with the United States, and the surplus in trade with Europe is expected to grow.

In 2008 the next Olympic Games will be held in Beijing. That will be a celebration of the development of China both as an economic power and as a major power in international affairs. There is, inevitably, a long way to go. Deng Xiao Ping’s free-market reforms were initiated only in 1978.

No less than 60 per cent of the Chinese population still works on the land, at low wages and usually with peasant levels of productivity. Yet that gives an indication of the reserve of manpower that still remains to be brought into the modern economy. The Chinese economy probably still has another 25 years of high growth ahead of it. Before it reaches full maturity, the Chinese economy will be a multiple of its present size.

My own optimism is not only based on the growth of the economy, though that is the outstanding economic growth record of the past two decades. China has also understood the important of domestic and international freedom of trade and the need for the best possible relations with trading partners. With direct material and financial support, China has been one of the large contributors to the relief of the Indian Ocean countries after the tsunami disaster. The economic maturity of the new China has been accompanied by increasing political maturity. That is the best guarantee for the future of what is beginning to look like the Chinese century.

Join the Debate
Send your e-mails to debate@thetimes.co.uk

Times Recommends

• Treasury needs a new golden rule fast
• Testing doctors is no magic cure
• We must cry out for the poor