The Chinese prime minister, Wen Jiabao, was talking with Tony Blair last week about trade and other matters but, more importantly, this weekend sees the next Group of Seven finance ministers' meeting, in Singapore.

This is the usual autumn meeting that takes place before the annual meetings of the International Monetary Fund and World Bank, but the fact that it is in Asia gives the opportunity for the whole financial community to focus on what is happening in the region. Henry Paulson, the US treasury secretary, will go on to China after the meetings.

Last week he restated the US position on the Chinese economy, noting there were a number of "critical, immediate challenges" the country faced. These included putting in place "widely accepted market-based tools to prevent the economy veering out of control" and "a much more flexible market-driven exchange rate along with a more nimble, selfdetermined monetary policy".

It is interesting he should pick out those points because we tend to focus on the "wow" factor of Chinese growth without paying proper attention to the inherent instability of an economy still largely controlled by administrative decisions rather than market-driven ones.

The exchange rate is a particularly sore point with Americans who, with a certain amount of justification, blame the widening of the US current account deficit on an undervalued Chinese exchange rate.

Now the US has its own difficulties, of which excessive domestic demand is one . . . the current account deficit represents the US consumer's hunger for cheap imports, which has in turn been associated with (until recently) loose monetary policy and loose fiscal policy.

Nevertheless, the size of the Chinese current account surplus does say something about the country's super-competitiveness.

The astounding surge in exports, and the extent to which these have outpaced imports, is shown in the first chart. Note that the gap widened most dramatically in 2005, a time when China paid very high prices for imports of raw materials and oil.

The other two charts show how the country ranks in the global league table of exporters. If you add invisible and visible exports together (and take Hong Kong's invisible exports into consideration) China has passed the UK and Japan. In terms of visible exports, it is indubitably number three. This data is for 2004 . . . full 2005 figures are not yet available . . . so the margin will have been larger still last year.

This growth looks set to continue and it certainly has through 2006. Perhaps the most thorough outside study of Chinese economic prospects is the work done by the OECD. It predicts that China's share of world visible exports will have risen to 10% of the global total by 2010 and that, at about that time, China will become the world's largest exporter of physical goods, passing Germany. It will probably take a bit longer to pass the US as the largest overall exporter . . .

visible and invisible together . . . but the trend is clear.

Well, that is the "wow" story . . . what about the concerns?

Being the world's largest exporter will shape Chinese policy in several ways. It will be very much in the nation's selfinterest to maintain a reasonably liberal global trading environment. But it will also make China even more vulnerable to any fall-off in the growth of world trade.

Paulson's points are the right place to start, as I think a policy error by the Chinese authorities is one of the main potential dangers.

It is very hard to move from a system where much of the investment is determined by an administrative process to one where the market drives the decision. State-owned banks that make a loan because the party says they must make the loan have a quite different culture from commercial banks that have to consider whether the loan is likely to be serviced and eventually repaid. Western bankers are being drafted in to help, but the task is huge.

China is making slow progress towards freeing the yuan (there was an experimental move announced last week) but the pace of reform is unlikely to satisfy the US Congress, where protectionist pressures keep bubbling away.

Beyond these concerns, there are the inevitable environmental and resource worries. These fall into two groups: the physical danger to the environment and the financial pressure of more expensive raw materials. The first is a terrifyingly large task and will preoccupy not just China but the whole world for another generation.

The second is the main mechanism whereby Chinese growth imposes costs on the rest of the world. If China uses more oil then we all pay, and prices are higher.

Current estimates suggest that more than half the increased demand for oil in 2007 will come from just two countries, the US and China. The increase in demand next year, at 1.7 million barrels a day, is projected to be greater than the increase this year of 1.2 million barrels a day.

There is projected to be some increase in production from nonOpec countries, but it seems likely that this year's tight conditions will prevail next year too. So the present slight fall in oil prices seems unlikely to be sustained.

Of course, if the US economy does slow sharply next year, that will cut oil demand. It will also presumably cut demand for Chinese exports and the question then would be whether and how China might replace external demand with domestic demand.

That leads into what seems to me to be the most interesting element of the whole debate.

There is at the moment some sign of slower growth globally. The global leading indicator that is calculated by the Bank Credit Analyst group is pointing down and that has in the past been consistent with slower growth.

BCA notes that it is not just slower growth in the US that is causing this to happen: the leading indicator excluding the US has also started to head down.

We are now in a world where China is vastly more important than it was six years ago during the last sharp downswing of the cycle. So will China be the locomotive for world growth, replacing the US? Or is it so dependent on the US consumer that it too will be dragged down?

Or will there be some policy error, as noted above, that contributes to the slowdown? We just don't know.

What we do know is that the shape of the world economic cycle is now determined as much by China as by the US, and that both are much more important than Europe.

During the next few days there will be a fair amount of economic news from these Singapore meetings, most of which will be pretty ephemeral. There are, however, two things to look for.

One is the big US domestic story about which quite a lot has been written: American house prices and all that. The other is what is happening to China. Expect much more of the latter in the coming weeks.

My own view, for what it is worth, is that the more likely trigger for the next downturn will be something happening to house prices worldwide. There is an element of "bubble" to prices in many markets (as the new IMF Economic Outlook acknowledges).

But the second most likely trigger will be some disruption in the Chinese economy, leading to disruption more generally throughout East Asia. But all this is, I think, still some way . . . perhaps a couple of years . . . into the future. (Independent)