According to figures published by the International Monetary Fund, China has surpassed the US in economic output of real goods and services - a measure widely accepted as a gauge of total economic activity.

It's an esoteric measurement, but important because it ignores exchange rates:

These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders.

China recently changed the way it calculates gross domestic product, bringing the measure in line with international standards:

China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.

As recently as 2000, we produced nearly three times as much as the Chinese.

To put the numbers slightly differently, China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the U.S.

This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade.

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Yes, all statistics are open to various quibbles. It is perfectly possible China’s latest numbers overstate output — or understate them. That may also be true of U.S. GDP figures. But the IMF data are the best we have.

Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.

This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century. And we have lived for 200 years — since the Battle of Waterloo in 1815 — in a world dominated by two reasonably democratic, constitutional countries in Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.

This development was inevitable once China eschewed pure socialism and embraced some market reforms. China has three times our population and their economic growth for the past decade has been staggering. What's truly amazing is that there are still half a billion people living much as they did 40 years ago. But the migration of the Chinese peasantry from farms to the city continues to change the face of modern China as rapid industrialization demands more and more workers.

But China is resource poor and must import a lot of its raw materials. That may eventually put a brake on their economic expansion. In the meantime, the Chinese economy is gradually slowing as the rest of the world is experiencing recession-like conditions.