Fortunately, most of what needs to be done to achieve a better balanced and less unstable world economy is strongly in the economic interests of both sides. This is becoming ever more obvious as China struggles with inflationary pressure and the lagged effect of the surge in credit growth used to cope with the downturn in exports during the crisis.

It is also evident that a large real appreciation of the Chinese exchange rate is inevitable and a way of facilitating a shift in the economy toward greater reliance on domestic consumption. A higher nominal exchange rate would surely be a better way of achieving such a real appreciation than higher inflation.

This rebalancing is, however, merely one element in the agenda, as China grapples with the challenges of achieving rapid, widely shared and environmentally sustainable growth and the rest of the world learns to adjust to its growing impact. In seeking to address these challenges, China and its partners need to remember two over-riding considerations.

First, the political and economic consequences of a breakdown in relations between China and the West would be catastrophic. At best, it would be impossible to sustain prosperity and manage the many common challenges created by the pressure of humanity on the world's limited resources. At worst, it could mean war.

Second, it is vastly important to strengthen the legitimacy and effectiveness of global governance. China may view these structures as Western invention, if not an alien imposition. But they remain the best way to manage a world in which no one country - even ones as powerful as the US or as potentially powerful as China - can achieve what it wants for its own people on its own.

What, then, is the economic agenda that both sides need to tackle?

This is well known: maintaining open trade, securing balance of payments adjustment, reforming the international monetary system, managing the global commons, and containing potential conflicts over access to natural resources.

Both countries have strong suspicion of each other. Both dislike constraints on their freedom to act. Both find some aspects of the other's behavior intolerable. Yet both must also be aware that what lies ahead of their countries is a long and intense relationship. Technology and economics have made the world smaller than ever before. China's development is putting to an end the period of unquestioned Western supremacy. East and West must cooperate or perish.

The author is associate editor and chief economics commentator at the Financial Times.