Apart from external borrowings, the US has been selling the 'family silver' to finance its fiscal and current account deficits. Foreign acquisitions of US companies totalled as much as $ 400 billion last year. In addition, foreigners are buying residential and commercial real estate ($ 100 billion last year). The fact that Asian Sovereign Wealth Funds had to rescue American banks tells its own tale. (Incidentally, Asian Sovereign Wealth Funds are expected to total as much as $ 3 trillion -- and many top Wall Street executives are moving to Asia.)

Weak finances are, of course, only one part of the story. Post-Iraq, and even as it begins a new cold war with Russia, the US finds itself left with few friends and decreasing global influence. Its unconditional support of Israel and its double standards (winking at Israel's flouting of Security Council Resolutions; support of reactionary and corrupt monarchies in the Middle East even as it trumpets its commitment to the spread of democracy elsewhere, etc) are great gifts to China's geopolitical ambitions.

The contrast between the way the US has frittered away its goodwill, moral authority and friendship, and the way China has managed to settle all its boundary disputes (except with India) and the way it has cultivated the African continent with aid, trade and investment is stark. Most remarkably, it has shown political maturity in mending fences with Taiwan and burying the hatchet with Japan -- the latter would hardly have been easy, given the Japanese occupation of China in the 1930s, the massacres in Nanking and many other atrocities.

But, let's come back to economic power. For a long time, the US used to account for almost 40 per cent of world GDP growth. China overtook the US and last year accounted for a quarter of global growth. The Industrial and Commercial Bank of China has become the world's most profitable bank, also boasting the highest market capitalisation. In fact, three out of the five largest banks by market capitalisation are now Chinese.

China has also managed to reduce its dependence on the US market for exports -- the US now accounts for just 8 per cent of Chinese exports, even as its intra-Asian trade keeps growing. (It has become Japan's largest customer, displacing the US.) The more remarkable thing is how Chinese manufacturing is moving into high tech -- even in the traditional areas of garments and toys, it is increasingly moving from selling what the buyer wants to marketing what it is designing. To be sure, GDP growth may slow to 10 per cent in 2008 and the current account surplus stagnate.

In a different field, as expected, China topped the gold medal tally in the recent Olympics with 51 medals and putting on another fantastic show at the closing; the US was second with 36. I often wonder whether the drive to excel in economic and other spheres comes from a national commitment to end forever the humiliations China suffered at the hands of foreign 'barbarians' for a couple of centuries. Historically, it has always been proud of its civilisation -- it was to avoid polluting contacts with foreigners that a 15th century emperor ordered destruction of the Chinese seagoing fleet, then the world's largest and most advanced, and opted for a closed economy, triggering the decline of the Chinese civilisation.

To be sure, major problems remain, particularly income inequalities and the growing rural-urban divide. Even as the number of university students has gone up rapidly (to a projected 20 million by 2010, from just 6 lakh (600,000) in 1992), the quality of education remains a problem. But, overall, will the 21st century witness a major global powershift, this time across the Pacific? One should of course not underestimate the US, its strength in research and innovation, its great universities, its ability to attract talented immigrants, etc. But will that be enough to face a resurgent China, determined to take its legitimate place in the sun?