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The different ways of looking at China’s economy are not just “theoretical” but “have real-world significance” and should serve as a “wake-up call” for Americans, he said.

“The economic advantage China is gaining will only widen in the future” because China’s economy is growing more than three times faster than the U.S. economy, he said. Moreover, China already is the world’s largest exporter and the biggest foreign holder of U.S. Treasury debt, giving it significant leverage over the U.S. and world affairs.

That raises the likelihood that the 21st century will become a “Chinese century” dominated by China just as the 20th century was an “American century” dominated by the U.S., he said.

“The combination of economic size, trade and creditor status will confer on China a kind of economic dominance that the United States enjoyed for about five to six decades after World War II,” he said.

“America’s ability to influence China will be seriously diminished,” he said. “And the open trading and financial system that the United States fashioned after World War II will be increasingly China’s to sustain or undermine.”

‘The Japanese model’

Others are not so alarmed by China’s rapid ascendance and say the Asian tiger is more of a pussycat.

Michael Pettis, finance professor at Peking University, said China is the one that should avoid becoming overconfident. That is because China followed the “Japanese model” to achieve its impressive rates of growth, driven by exports to the U.S. and the rest of the world and nurtured by an undervalued currency.

But that model, while effective at industrializing the economy and bringing it up to modern standards, turned into a major bust in Japan and other Asian countries once they reached the limits of such export-led growth, he said.

“This model always runs into the same fatal constraints: massive overinvestment and misallocated capital. And then a period of painful economic adjustment,” he said, pointing to Japan’s “lost decade” that started in the 1990s and continues to this day.

Many economists see echoes of Japan in China’s overbuilt and overvalued real estate and stock markets today. Fear that those overheated sectors are developing into a bubble that may soon collapse have haunted global markets this year.

“The Japanese model steals wealth away from the household sector to subsidize growth” among exporters, builders and government-led industries, Mr. Pettis said. “Once the train gets going, it has been very difficult to correct course because too much of the economy depends on hidden subsidies to survive.”

Yukon Huang, an analyst with the Carnegie Endowment for International Peace, said the threat of overheating and inflation is forcing China to find a new, more sustainable source of growth by looking inward to its 1.3 billion consumers.

The transition to more domestic-led economic growth like that in the U.S. is enhanced by letting the yuan’s value rise, giving consumers more purchasing power even as it holds down the prices of imported goods such as oil and copper.

This will lead to slower growth than China has experienced in the past decade and will slow its ascendance on the world stage, he said.

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