Among the more enduring features of the global economic landscape over the past 15 years has been America's remarkable productivity performance. While Japan has been mired in its post-bubble deflation and an inflexible Europe has virtually stagnated, US economic growth has consistently outstripped that of its major industrialized competitors. And, despite all the ballyhoo about increased global competition and underlying US economic imbalances, the US productivity miracle shows little sign of abating.

The most recent Federal Reserve estimates suggest that the US productivity machine is humming and that US economic potential growth is likely to be about 3 per cent for the foreseeable future. This would be not only a triumph for free-market economics but would place the US economy in a class of its own among the world's more mature economies.

Yet a dangerous myth is stalking international financial capitals. It is the idea that China has finally awoken and that the 21st century is going to belong to Asia.

This myth overlooks China's fundamental political weaknesses. It also turns a blind eye to China's economic clay feet and its many economic vulnerabilities. As such, it unnecessarily stokes American fears about the rising Chinese dragon and runs the danger of spawning protectionist pressures, which could undermine the global trading system.

There can be little gainsaying China's remarkable economic performance since Deng Xiaoping launched China's economic reform program in 1979. Over the past 25years, as it increasingly opened its economy, China has grown at an annual average rate of 9per cent, or at an appreciably faster pace than Japan and South Korea during their earlier economic miracles. This has allowed China to increase its gross domestic product tenfold and to lift 400 million of its citizens out of poverty.

Impressive as China's past economic performance has been, it would seem to be a mistake to simply extrapolate that performance indefinitely into the future, as many in both the media and in US political circles seem to be doing. Rather, it would seem prudent to ask whether China has either the political or the economic underpinnings to sustain its economic miracle.

With memories of Tiananmen Square now faded, all too many take Chinese political stability for granted. History teaches, however, that rapid economic progress all too frequently collides with the absence of real political reform in a manner hardly conducive to sustained economic growth.

How confident can we be that China's emerging middle class, which is being progressively integrated into the global economy, will indefinitely tolerate the blue-suited and black horn-rim wearing apparatchiks of the Communist Party? How confident can we be that China's inevitable political modernization will be effected in a seamless fashion?

Perhaps of more immediate concern for China's continued rapid economic progress is the very imbalanced nature of its economy. Indeed, today China is investing a staggering 45per cent of its GDP, which has to raise questions as to whether China is not in the late phases of an overinvestment cycle.

At the same time, China's low interest rate policy, which is a product of its de facto currency peg to the US dollar, is spawning speculative excesses especially in China's overheated property markets. Might this investment frenzy not be a prelude to the sort of investment bust and overhang that China experienced in the early 1990s and that put a lid on Chinese growth for a few years?

Yet another potential factor that could interrupt China's economic miracle is China's very high reliance on the export sector to power its economy. At present, China's exports are growing at an annual 30per cent rate, while its overall current account surplus will soon exceed $US150 billion ($204billion). This would put China's external surplus ahead of that of Japan, making China the largest surplus country in the world.

Is it reasonable for China to expect the rest of the world's indefinite forbearance of China's mercantilist exchange rate policy that provides a basic underpinning to its rapid export-led growth? Or should China not be reading the clear signals emanating from the US Congress that hefty import tariffs on Chinese goods are on the way if China does not display greater exchange-rate flexibility? If the experiences of other countries are anything to go by, weaning China's economy away from export-led growth and towards a domestic-driven economy could prove to be no easy task.

While there are many and very real short-term risks to the Chinese economic miracle, the more fundamental reason why the US need not fear a long-run economic challenge from China lies in the disparate productivity performance between the two economies. China's recent rapid growth has not been the product of technological innovation or productivity increases of the sort that is now taken for granted in the US. Rather, it has been the product of investing an inordinate proportion of its income and of bringing part of its rural labor surplus into the market economy.

For China to pose a real long-term economic threat to the US, China would need to match the US's sustained productivity performance, which has long been the envy of the world. Unless China truly embraces free-market economics, there is little chance of that occurring anytime soon.

And until China does so, the US should treat China as yet another, albeit large, emerging market economy that is trying to close the income gap between itself and the more prosperous industrialized world.

Desmond Lachman is a resident fellow at AEI.