This exploration of the impact of China and other emerging nations on the western economies by Stephen King – not the novelist but rather the global chief economist at HSBC – has an oddly disconcerting effect. Losing Control covers much familiar territory. After all, the FT's Martin Wolf has written about global imbalances in his Fixing Global Finance, Tom Friedman has bigged up the role of emerging economies in The World is Flat, and Jim O'Neill of Goldman Sachs is famous for his early recognition of the importance of the BRICs (Brazil, Russia, India and China) for the rest of the world. So plenty of the material in Losing Control is familiar – but the perspective is new. I've not come across another book which so forcefully gives the European or American reader a China-centred view rather than a western-centric one.

This is consistent with comments I've heard recently in private conversation from leading businessmen and bankers with experience in China and India. They've been saying that, for all the lip service many political leaders and business executives pay to the importance of emerging markets as trade partners or sources of or destinations for investment, few people in the west can acknowledge that the centre of gravity of the global economy is shifting east.

So part of Stephen King's message is to reinforce this point. He argues that the emergence of the Asian giant economies as pools of labour and sources of saving will have dramatic effects on the global distribution of investment and wealth. The challenge is to find the least destabilizing ways of managing this. Not that he's an optimist about the chances of avoiding both economic and geopolitical instability. A second part of his message is that the economics and politics are conjoined because the emerging capitalism in China, India and elsewhere is state capitalism. Just as western governments have for long decades run global institutions and rules of engagement to favour their own national interests, so the emerging powers will do the same. This includes the specific form of sovereign wealth funds. The emerging economies have already built up large holdings of western assets, both real assets and financial assets. Thus US government debt by 2008 stood at 68% of GDP, and is of course rising fast, up from a 1981 low of 33% of GDP. Foreign owners hold about a third of the stock outstanding, before we even count quasi government paper such as Fannie Mae and Freddie Mac bonds. Then there are foreign holdings of private financial and real assets, including direct investment. A large proportion is held by state entities.

Although King doesn't quite predict this outcome, for me the figures emphasize the likelihood of an effective default by inflation. He doesn, however, criticize the policy focus on inflation targetting as the prime means for ensuring economic stability. In his view, it has on the contrary contributed to the financial instability we've experienced, for central banks have had too narrow a focus on a sub-set of domestic prices. His third message is the importance for good macroeconomic policy of acknowledging the reality of global capital markets. In particular, commodity prices are determined increasingly by the emerging markets – their collapse in the mid-1990s fooled western central bankers into thinking the inflation dragon was tamed and there was a 'new economy' miracle under way. He concludes: “Central bankers do not take seriously enough the distortions to prices and wages stemming from the emerging world. These distortions are only going to get bigger over time.” (p121) Controlling inflation is misconceived for a world of great uncertainty and global redistribution, just as Keynesian demand management was fine for the 1960s but inappropriate in the 70s, he concludes.

This is a rather scary vision – as the book cover underlines. We are entering a period of big winners and losers, with westerners being the losers, King predicts. This is not a global market economy but an economy of state capitalism and the deliberate pursuit of national interests. A resurgence of nationalism combined with the scale of the global flows of capital and trade does not spell stability. The stock of foreign investment is well over 100% of world GDP, while the number of nation states has doubled. “The history of the world is full of strategic miscalculations. There's no reason to believe the future will be any different,” King gloomily concludes.

I'm not quite so gloomy. Although I thoroughly agree with him that we do far too much interpret economic events through western eyes, there are two dimensions Losing Control omits. One is that the path of economic growth isn't guaranteed for China, which has huge environmental and infrastructure challenges, the same demographic problem as the west thanks to its one child policy, and which still has to find a sustainable political structure – we can't yet be sure that the authoritarian market is viable on a large scale. The second is that there is a massive change in technological structure to overlay on the geopolitical end economic shifts. There was certainly a bubble – at least one – in the 'new economy' but that doesn't mean it's not real. It seems to me this subverts or at least transforms the kind of nationalistic economic policies King describes. He inclines towards, if not a zero-sum view of the world, then certainly the view that the losers from the net positive sum game of globalization will be westerners no longer able to manipulate world markets in order to gain the economic rents. It would be naive to think there will be no losers but it's not obvious to me that it has to be as starkly bad for the west as this.

Still, this is indeed a time of extraordinary uncertainty about the future of economic power and our chances of prosperity in the years and decades to come. There is plenty to be pessimistic about. Even those who think they're familiar with the arguments about global imbalances and the rise of China should read Losing Control – as I noted, it does present a disorienting and thought-provoking perspective.