China has many more workers, but they have been much less productive, and so its economy has been smaller than ours. But China's productivity has grown remarkably over the past three decades. They have been having their own industrial revolution. With a workforce four times as large, China needs only one-quarter of our per capita productivity to overtake us and become the largest economy in the world. That is what is now happening. This change is not about America. It is about China. America remains, in itself, as strong, resilient and creative as it has always been, but we simply cannot ignore the fact that China's government, for all its faults, has presided over the greatest increase in material welfare in history. As China's economy grows, the other dimensions of its power will grow, too. We need to recognise this, but we need also to keep it in perspective. China will remain a strong country, but it will never rule the world. It will have to deal with many other strong states - Japan, India, Russia, the EU and, of course, the United States. While its interests will expand around the world, it will remain focused on East Asia. But as China's power grows, I believe it will want to be a great power again, and to be treated as a great power by others.

That raises a question: how will China use its power? Will it be a harsh bully or a co-operative partner in a regional order? The answers are not yet clear. One thing, however, is clear. China's ambitions are not compatible with the old order, the one that has kept the region peaceful and prosperous for four decades since Nixon met Mao. Since 1972, America's role as the leader of Asia has been uncontested by any other major power. We have been not just a leader in Asia but the leader in Asia. But today we face a new reality. China has begun unmistakably to contest American primacy in Asia and the regional order that has been built on it. The choice America faces is how we respond to China's challenge to our leadership of Asia. I believe we have three alternatives.

First, we can withdraw from Asia. However, this would leave Asia to be either dominated by China, or devastated by the rivalry of Asia's great powers. This would threaten both America's security and its economy. Second, we can push back against China's challenge, aiming to maintain our supremacy and compelling China to accept it. For many this is a natural, instinctive response. And if China is determined to dominate Asia by force, it will be the right response. But we should be under no illusions about its cost. The third option is to seek an agreement with China about a new order in Asia, an order that would allow China a bigger role, but preserve a major role for America in keeping Asia secure. By remaining engaged, America will balance China's power and help to ensure that its power is not misused. By stepping back from primacy and allowing China a bigger role, we will seek an accord that avoids the risks of rivalry, while preserving America's key interests. The essence of such an accord is simple. America and China would share power in Asia as equal partners in a joint regional leadership. That does not mean we would agree about everything, but it does mean we would manage our disagreements carefully.

Once Americans accepted the burden of leadership because it was the only way to keep America safe and the world at peace. But they also recognised that in time a new order could arise in which the US worked with others as equal partners to keep the world stable and prosperous. President Nixon had such a vision before he went to China. In 1972, he told Time magazine: ''I think it will be a safer world and a better world if we have a strong, healthy United States, Europe, Soviet Union, China, Japan, each balancing the other.'' And president Bill Clinton said a decade ago: ''America has two choices. We can use our great and unprecedented military and economic power to try to stay top dog on the global block in perpetuity. Or we can seek to use that power to create a world in which we are comfortable living when we are no longer top dog on the global block.'' Today we confront that choice. I think most of us would agree that America's political system has not been at its best these past few years. The tougher we politicians have talked, the more reluctant we have been to face tough facts and take tough decisions. Perhaps we feel America is so strong that we do not need to see the world as it really is. That would be a historic mistake, and contrary to America's true strengths and virtues. We need now as a country to debate our future with China carefully, soberly, responsibly and realistically. America's future depends on it.

This is an edited extract from The China Choice: Why America Should Share Power, by Hugh White, published by Black Inc. It is being launched by Paul Keating tomorrow. $29.95.